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NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Research Analyst Profession

A research analyst is about to publish a report on a listed company. Which practice best reflects the principle of objectivity and independence in the analyst's role?

The practice that reflects objectivity and independence is basing the rating on the analyst's own analysis and disclosing any conflicts of interest in the report. Changing ratings for management, tying pay to deal volumes, or favouring clients compromises independence and creates unmanaged conflicts.

  1. ASharing the draft with the company's management and changing the rating at their request
  2. BBasing the rating on the analyst's own analysis and disclosing any conflicts of interest in the reportCorrect
  3. CLinking the analyst's bonus to the volume of investment banking deals won for the covered company
  4. DIssuing a buy rating to maintain good relations with a corporate client

Explanation

Independence requires that recommendations come from the analyst's own analysis and that conflicts are disclosed. Altering ratings at management's request, linking pay to deals, or favouring clients compromises objectivity and creates conflicts.

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