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

Under the SEBI (Research Analysts) Regulations, 2014, which of the following is a correct statement about the conduct of a research analyst in relation to a company that it is covering?

A research analyst must disclose financial interest, ownership and other conflicts of interest in the subject company in the research report. Front running, selective early sharing of recommendations and paid favourable ratings breach the independence and fair-dealing requirements of the regulations.

  1. AThe analyst may accept compensation from the subject company for providing a favourable rating, if disclosed
  2. BThe analyst must disclose any financial interest and conflicts of interest in the subject company in the research reportCorrect
  3. CThe analyst may trade ahead of publishing the report on the strength of the recommendation
  4. DThe analyst may selectively share the draft recommendation with preferred clients before publication

Explanation

The regulations require disclosure of financial interest, beneficial ownership and other conflicts of interest in the subject company. Trading ahead of a report (front running) and selective early sharing are prohibited. Compensation for a favourable rating undermines independence and is not made acceptable merely by disclosure.

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