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

A research analyst's relative holds shares of a company the analyst is about to cover. Which treatment is consistent with the SEBI Research Analyst Regulations?

The analyst should disclose the relative's financial interest in the subject company to readers of the report. Holdings of relatives are within the conflict-of-interest rules, so being indirect does not exempt them, and there is no rupee threshold or disclosure only to a broker.

  1. ADisclose the relative's holding in the report if the holding is financial interest, and, where applicable, the analyst must ensure that conflicts are disclosed and managed, instead of ignoring itCorrect
  2. BNo disclosure is needed because the shares are not held by the analyst directly
  3. CDisclose only if the relative's holding exceeds Rs 1 crore
  4. DDisclose only to the relative's broker

Explanation

The regulations treat holdings of the analyst and of relatives as relevant to conflict of interest, so the analyst must disclose such financial interest to the client or reader. Indirect holding is not exempt, there is no Rs 1 crore threshold in the rule, and disclosure is to users of the report, not a broker.

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