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NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Research Analyst Profession

Which of the following activities by a research analyst would be a clear breach of the expected professional conduct standards?

Trading in a security before publishing a report that recommends it is a clear breach, because it exploits unpublished information about the recommendation at the expense of clients and the market. Stating assumptions, revising targets on new data and keeping records are proper practices.

  1. ATrading in a security ahead of publishing a report recommending it, using knowledge of the unpublished recommendationCorrect
  2. BPublishing a report with clearly stated assumptions and sources
  3. CRevising a target price after a material change in earnings
  4. DMaintaining records of the basis for recommendations

Explanation

Trading ahead of a report (front-running) misuses non-public information about the forthcoming recommendation and conflicts with client interest and fairness. The other three actions are good practice: stating assumptions, updating views on new information, and keeping records.

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