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NISM Certifications · NISM-Series-XV: Research Analyst · Legal and Regulatory Environment (NISM XV)

A research analyst's recommendation on a listed company is being prepared. Which practice is consistent with the conflict-of-interest principles in the SEBI Research Analysts Regulations?

Keeping research separate from other business activities and disclosing any compensation from the subject company is consistent with the regulations. Trading ahead of a report, altering ratings for fees, or letting investment bankers control ratings breaches independence and conflict-of-interest rules.

  1. ATrading in the subject company's securities in the period just before publishing the report, using the analyst's own account
  2. BSharing the draft report with the company's promoters to alter the rating in exchange for fees
  3. CHaving the research team report to the firm's investment banking head who decides ratings
  4. DKeeping research activity separate from other activities and disclosing any compensation received from the subject companyCorrect

Explanation

Regulations require independence of research and disclosure of any compensation or conflict relating to the subject company. Trading ahead of a report, selling ratings, or investment banking control of ratings all breach the objectivity and conflict-management principles.

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