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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A research report on a listed company contains a rating, but the analyst's firm acted as merchant banker to the company's public issue within the last twelve months. What is the appropriate treatment for the report under good practice and SEBI research analyst norms?

The association should be disclosed in the report so readers can judge possible conflicts of interest. SEBI research analyst norms require disclosure of relevant relationships with the subject company, such as merchant banking work, because transparency protects the objectivity and credibility of the recommendation.

  1. ANo disclosure is needed as the rating is based on public information
  2. BDisclose the association in the report so the reader can assess potential conflict of interestCorrect
  3. CWithdraw all financial data from the report
  4. DRaise the rating to compensate for the relationship

Explanation

Research analyst regulations require disclosure of relevant associations and conflicts of interest, such as investment banking or merchant banking relationships with the subject company. Hiding it, or altering ratings because of it, undermines objectivity. Removing data does not address the conflict.

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