Following a settlement reached between regulators and Wall Street investment banks in late 2003 which imposed many restrictions on firms offering both banking and research services, several of the institutions in question decided to close down or spin off their research departments, leaving some of the smaller listed firms in the United States under the radar in terms of attracting the attention of investors.

As a result, many such firms are considering paying for their own research, a move which the CFA Institute and National Investor Relations Institute warned is potentially fraught with danger.

Under the new guidelines issued by the trade groups in order to help firms avoid regulatory pitfalls, analysts must be paid in cash before the reports are written, and must disclose the fact that they are being compensated by the company, in addition to any other ties that they have with it, in their report.

In addition, companies must agree not to retaliate against brokerages and analysts who offer negative opinions regarding their financial and governance situation. Analysts will also be prevented from letting companies review recommendations in advance.

Although, according to an Associated Press report, the CFA Institute and the NIRI acknowledged last week that they have little power to enforce the guidelines, they warned that:

"Members of each organization should be aware that violations might result in disciplinary actions."