NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Research Analyst Profession
A research analyst wishes to publish a report on a listed company. Which practice best reflects the independence expected of the profession?
The analyst should disclose any financial interest in the subject company and base the rating on independent analysis. Accepting rating-linked fees, letting management alter conclusions, or trading ahead of publication all compromise objectivity and breach the standards of conduct expected from research analysts.
- AAccepting a fee from the company that is contingent on a favourable rating
- BDisclosing any financial interest in the subject company and keeping the rating based on analysis rather than on the company's wishesCorrect
- CAllowing the company's management to rewrite the rating before release
- DTrading ahead of clients before the report is made public
Explanation
Independence and objectivity require that conclusions rest on the analyst's own work and that conflicts such as financial interest are disclosed. Contingent fees, management editing of ratings, and trading ahead of publication all compromise objectivity or are prohibited front-running.
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