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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A broker's research analyst issues a report on a listed company. The broker's proprietary desk holds a long position in the same stock. Under SEBI's research analyst framework, what must the broker ensure?

The broker must disclose the holding or conflict of interest in the research report and ensure the research activity is free from undue influence by the proprietary desk. Disclosure is required regardless of the recommendation type or any threshold, and the report need not be withdrawn.

  1. ANothing, as holdings need not be disclosed if the recommendation is Buy
  2. BDisclose the holding or conflict of interest in the research report and keep the research activity free of undue influence from the proprietary deskCorrect
  3. CWithdraw the report from circulation permanently
  4. DDisclose the holding only if the position exceeds 10 percent of the paid-up capital

Explanation

SEBI's research analyst regulations require disclosure of financial interest and conflicts of interest in research reports. Activities must be kept free from undue influence by trading desks. The rule does not rest on the recommendation being Buy and does not involve a 10 percent threshold; the report need not be withdrawn.

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