While we agree that in some cases the use of an automatic rebalancing tool would not amount to a prohibited recommendation, it may be difficult, particularly in unforeseen circumstances such as a market disruption event, for any alerts pushed out to clients not to constitute a recommendation. For example, the setting of an alert for percentage/dollar amount of change in a security in a portfolio may itself consist of an implicit investment recommendation to change holdings outside of the client’s automatic instructions.
Overview of the Council’s Comments:
We respectfully disagree that research reports that are made available on OEO websites to be “pulled” by clients should generally not be considered to be recommendations. Although investors may be increasingly familiar with these types of reports (along with the potential conflicts of interest that exist if the issuer is a related or connected issuer of the analyst firm), in our experience the purpose of most research reports is to drive an investment decision (buy, hold or sell)