The Complete Guide to Expert Network Compliance for Investment Firms

Compliance is not a checkbox in expert network engagements. It is the foundation that makes primary research legally defensible and institutionally sustainable.

What does expert network compliance involve for investment firms?

Expert network compliance involves the systematic screening, documentation, and governance processes that ensure expert call programmes do not expose investment firms to regulatory risk, insider trading liability, or reputational harm. For institutional investors, compliance infrastructure is not optional. It is a prerequisite for any expert network engagement that can withstand regulatory scrutiny.

Core compliance requirements at a glance

Conflict of interest screening: Every expert must be screened for current employment at the target company, its direct competitors, or any entity that could create a material conflict.

MNPI protocols: Material non-public information must be explicitly prohibited in every call, with documented pre-call instruction to the expert and post-call attestation.

Call documentation: All calls must be documented, including the expert's identity, the topics discussed, and a record of the compliance screening conducted before the call.

Audit trail: Documentation must be maintained in a format accessible for regulatory review and consistent with the investment firm's broader compliance infrastructure.

Why compliance matters more in expert networks than in other research

Expert calls create a specific regulatory risk profile that other forms of investment research do not. The direct, one-on-one nature of the interaction creates the possibility of information transmission that would not exist in published research or management presentations. The practitioner being consulted may have access to non-public information about publicly traded companies, former employers, or current clients. And the investment decisions that follow expert calls create a causal chain that regulators can trace if a question arises about the source of an investment decision.

This is not a theoretical risk. Regulatory action related to expert network usage has resulted in significant penalties for investment firms that did not maintain adequate compliance infrastructure. The firms affected were not rogue operators. They were well-resourced institutional investors who had underinvested in the governance layer of their expert network programmes.

The four pillars of expert network compliance

Pre-engagement screening. Before any expert is connected with an investment professional, the expert network must conduct and document screening for conflicts of interest, current employment at entities that could create MNPI exposure, and any other regulatory concerns relevant to the specific investment context. Call conduct protocols. Investment professionals must be briefed on the topics that are and are not permissible before every call. The expert must be informed of the same restrictions. This briefing must be documented. Post-call attestation. Both the expert and the investment professional should provide post-call attestation confirming that the call remained within the agreed scope and that no restricted information was exchanged. Ongoing monitoring. Expert networks should maintain updated screening on all active experts in their network, with processes for identifying changes in employment or other circumstances that could create new compliance risks for active clients.

A real example: the compliance process that prevented a regulatory issue

An investment team running expert calls on a publicly traded target submitted a brief requesting calls with former senior executives. Nextyn's compliance screening identified that one of the shortlisted experts had rejoined the target company in a non-executive capacity three months earlier, a change that had not been reflected in the expert's public profile. The expert was removed from the shortlist before any connection was made. Without that screening, an expert with potential access to material non-public information about the target would have been connected to an investment team actively building a position.

Common compliance mistakes in expert network programmes

Treating compliance screening as a one-time check rather than an ongoing process, which misses employment changes that create new MNPI exposure. Relying on expert self-disclosure alone without independent verification of the expert's current employment status. Not maintaining call documentation in a format that would withstand regulatory review. Failing to brief investment professionals on call conduct protocols before each engagement, particularly when the research context changes from a prior engagement with the same expert.

Frequently asked questions

What regulations govern expert network usage for investment firms? In the US, the primary regulatory framework is the Securities Exchange Act and SEC rules on insider trading. In the UK, the Market Abuse Regulation and FCA guidance on investment research apply. In the EU, MiFID II contains specific provisions relevant to expert network usage. Investment firms operating across jurisdictions should ensure their compliance framework addresses the requirements of each relevant regulatory environment.

How should investment firms document expert network engagements for compliance purposes? At minimum, documentation should include the expert's identity and current employment status, the conflict of interest screening conducted, the topics briefed as permissible and restricted, a record of the call, and post-call attestation from both parties. This documentation should be maintained in the firm's compliance records and accessible for regulatory review.

What should investment firms look for in an expert network's compliance infrastructure? Documented conflict of interest screening processes, MNPI protocols with pre-call instruction and post-call attestation, call recording and transcription capability, and a compliance team that can advise on jurisdiction-specific requirements. Ask for evidence of how the network has handled a compliance issue in practice, not just a description of their process in theory.

Are there investment contexts where expert network usage carries higher compliance risk? Yes. Research on publicly traded companies, particularly during active trading periods or ahead of material announcements, carries higher risk than research on private targets. Research involving former senior executives of targets carries higher risk than research involving industry observers. Research in jurisdictions with less established regulatory frameworks carries different risk profiles than research in developed market regulatory environments.

How Nextyn approaches compliance

Nextyn's compliance infrastructure is designed to meet the standards required by institutional investors across the regulatory environments in which we operate. Our screening processes, MNPI protocols, call documentation, and post-call attestation procedures are available for review by client compliance teams and legal counsel. We maintain an active compliance function that monitors regulatory developments across our operating geographies and updates our processes accordingly. For investment firms evaluating the compliance infrastructure of expert network providers, we welcome a detailed conversation on how our processes work in practice.