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

A SEBI-registered research analyst issues a report recommending a stock. Which of the following practices would be a violation of the regulatory requirements regarding the report and its recommendation?

Guaranteeing a fixed return to clients is a violation, because a research analyst must not give any assurance of returns. Disclosing holdings, stating that no compensation was received and giving a reasoned recommendation separating facts from opinion are all consistent with the regulations.

  1. AStating the analyst's holdings in the company at the time of the report
  2. BDisclosing that the analyst has received no compensation from the subject company
  3. CIncluding a rationale and clearly distinguishing facts from opinions
  4. DGuaranteeing the client a fixed return from following the recommendationCorrect

Explanation

Research analysts must not provide assurance or guarantee of returns, as this is misleading and breaches the code of conduct. Disclosing holdings, absence of compensation, and having a clear rationale with facts separated from opinions are all required or good practices.

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