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

A research analyst's close relative holds shares of a company the analyst is about to cover. What is the most appropriate step for the analyst to take under good practice for managing conflicts of interest?

The analyst should disclose the relative's holding in the research report and comply with the regulatory and internal policy requirements on such holdings. Hiding it, skewing the rating, or erasing records would breach objectivity and transparency expected of a research analyst.

  1. ADisclose the holding in the research report and follow the regulatory and internal requirements on such holdingsCorrect
  2. BCover the company without disclosure because the holding is in the relative's name
  3. CPublish a more favourable rating to protect the relative's holding
  4. DDelete the holding from internal records

Explanation

Holdings of the analyst and relatives that could create a conflict must be disclosed and managed under regulations and internal policy. Concealing them or tilting the rating violates the integrity and objectivity expected of analysts.

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