Modifications to Global Research Settlement
Pave Way for Chaperoned Research and Investment Banking Participation in Joint Due Diligence Sessions

March 19, 2010

The Southern District of New York (“SDNY”) recently agreed to modify the Global Research Equity Settlement (“Global Settlement”) paving the way for chaperoned research analyst and investment banking participation in joint due diligence sessions under certain circumstances.  Joint due diligence sessions not only reduce the burden on the issuer and other diligence participants of participating in multiple duplicative sessions but can also lead to a more robust and informed dialogue. We expect investment banks will promptly change their procedures to take advantage of this new flexibility.

In 2003, a number of the major banking firms entered into the Global Settlement with the SEC, state securities regulators, NASD, and NYSE in response to allegations that their investment banking interests had undue influence on securities research.  Earlier this week the SDNY agreed to modify certain provisions of the settlement as requested by the settling firms.  While many of the modifications merely eliminated provisions that were duplicative of comparable restrictions still imposed by the FINRA or NYSE rules, some of the modifications allow for greater flexibility in communications between research and banking personnel.


Most significantly, investment banking and research analysts may now participate in joint due diligence sessions with the issuer or third parties but only if the joint session:

  • takes place after the receipt by the firm of an investment banking mandate, or
  • in the case of an investment banking transaction other than an IPO, is in connection with a block bid, or with a competitive secondary or follow-on offering or similar transaction in which:
    • the issuer or selling shareholder has contacted the firm to request that the firm submit a transaction proposal and
    • the firm’s legal or compliance staff reasonably believes that the firm will not have a meaningful opportunity to conduct separate due diligence communications with the relevant parties prior to the award of a mandate for the transaction.

In addition, legal or compliance personnel or other counsel must chaperone the joint sessions and any subsequent discussions between research and investment banking personnel about the joint sessions.  We expect many firms will have underwriters’ counsel play this role.


See a copy of the SDNY Order containing the amended Global Settlement undertakings.


If you have any questions regarding this memorandum, please contact any of the lawyers listed below or your regular Davis Polk contact.

Sarah E. Beshar212 450
Alan F. Denenberg650 752
Michael Kaplan 212 450 4111
Richard J. Sandler 212 450
Lanny A. Schwartz212 450
Richard D. Truesdell, Jr. 212 450
Janice Brunner 212 450
Notice: This is a summary that we believe may be of interest to you for general information. It is not a full analysis of the matters presented and should not be relied upon as legal advice. If you would rather not receive these memoranda, please respond to this email and indicate that you would like to be removed from our distribution list. If you have any questions about the matters covered in this publication, the names and office locations of all of our partners appear on our website,
© 2010 Davis Polk & Wardwell LLP