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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A report on a listed company recommends Buy. The analyst's relative holds more than 1% of the company's shares, but the report is silent about it. Which statement is correct about this report?

The report is deficient. A research analyst must disclose in the report any financial interest, including holdings of relatives, in the subject company, so readers can judge possible conflicts. Good valuation support or private disclosure to the employer does not replace this public disclosure.

  1. AIt is deficient because the analyst must disclose such a financial interest in the subject companyCorrect
  2. BIt is acceptable because relatives' holdings need no disclosure
  3. CIt is acceptable if the recommendation is supported by valuation
  4. DIt is acceptable if the holding is disclosed only to the employer

Explanation

Under the Research Analyst Regulations, a research analyst must disclose financial interest, including that of relatives, in the subject company in the public appearance or report. Sound valuation does not remove the duty. Disclosure only to the employer does not inform the readers.

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