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

Which of the following best describes the restriction on a research analyst regarding trading in securities of a company that it covers?

A research analyst must not front-run its own recommendations or trade against them, and must follow the trading restrictions and disclosure norms laid down in the Regulations. Free trading without disclosure, or limiting trades to unlisted firms, is not what the rules provide.

  1. AThe analyst must not trade in a manner that front-runs or contradicts its recommendation, and must follow the trading restrictions and disclosure norms prescribed by the RegulationsCorrect
  2. BThe analyst may trade freely in any way without any disclosure
  3. CThe analyst may trade only on the day after the stock exchange holiday
  4. DThe analyst may trade only in the securities of unlisted companies

Explanation

The Regulations and code of conduct bar analysts from front-running and require adherence to trading restrictions around publication of reports, with disclosure of holdings. Free trading without disclosure, holiday-linked rules or confining trades to unlisted firms are not provisions.

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