Which lists are firms conducting investment banking activities required to maintain?

Firms conducting investment banking activities are required to maintain watch lists and restricted lists to manage potential conflicts of interest and ensure compliance with regulations.

The watch list typically contains securities that might be involved in upcoming investment banking transactions, where the firm has a potential conflict of interest. This list helps to monitor the activities surrounding these securities and provides a way to restrict trading by firm employees to prevent insider trading or the appearance of impropriety.

The restricted list, on the other hand, includes securities that the firm’s employees are prohibited from trading due to the firm’s involvement in an upcoming transaction, or because the firm possesses material non-public information about the security. Maintaining such a list is crucial for compliance with FINRA rules and regulations, as it helps firms uphold the integrity of the market and protect investors.

As a result, the correct answer highlights the importance of these two lists in the context of investment banking activities. Other options do not accurately represent the requirements set forth by regulatory bodies concerning the management of sensitive securities.