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

A research analyst's report states that a stock will 'definitely double in six months' and 'cannot fall'. Which regulatory principle is most clearly violated?

Research must be fair, balanced and not misleading, and analysts cannot promise or guarantee returns. Claiming a stock will definitely double and cannot fall is an assured-return statement. A footnote risk warning does not cure it, since the content itself is regulated.

  1. AThe analyst should offer guaranteed or assured returns, so the statement is permitted when well researched
  2. BResearch reports must be fair, balanced and not misleading, and must not promise or guarantee returnsCorrect
  3. CReports may carry such statements if a risk factor appears in the footnote
  4. DOnly the use of the title 'research analyst' is regulated, not the content

Explanation

Regulations and the code of conduct require reports to be fair, objective and not misleading, and they bar assurances or guarantees of returns. A footnote risk factor does not cure an assured-return claim. Content of reports is regulated, not only the title used.

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