Best Practices for Use of Expert Networks

These best practices have been developed by SIFMA member firms (“firms”) to provide guidance to broker-dealers on engaging and interacting with Expert Networks and their associated Consultants who provide information that might be useful in the formulation of investment views and in making investment decisions.  SIFMA does not believe that there have been any recent changes to permissible information usage and the insider trading laws, including the well-recognized materiality thresholds and “mosaic theory.” Both continue to be regularly applied by the courts in analyzing the permissible use of nonpublic information.  SIFMA believes the recent increased enforcement focus on the use of expert networks warrants the development and suggestion of these best practices for SIFMA member firms.

For purposes of this document, “Expert Networks” are defined as entities that refer paid industry professionals (“Consultants”) to third parties for a fee.  Such Consultants provide such third parties with information, advice, analysis, market expertise, or industry expertise for use in formulating investment views and in making investment decisions. “Confidential Information” is defined as any non-public information that is covered by a confidentiality agreement or otherwise subject to a fiduciary (or similar) duty that would prohibit its disclosure.  “Material Non-public Information” (“MNPI”) has the meaning under the federal securities laws as applied by court of relevant jurisdiction.