The article focuses on the amendments made in ICDR regulations by SEBI to provide relaxations i...
Before issuing a research report, a Research Analyst should disclose certain mandatory disclosures in the research reports as provided under the RA regulations. Individuals and entities engaged in giving recommendations to its clients through research reports should register with SEBI and comply with its provisions. In this article, we shall discuss such disclosure in research reports as mandated by the capital markets regulator.
As per SEBI (Research Analyst) Regulations, 2014, any written or electronic communication involving research analysis or research recommendation or an opinion in respect of securities or public offer, providing a basis for investment decision, is known as Research Report.
It is a written report prepared on research analysis or buy/sell/hold recommendation of providing an opinion on securities listed in a stock exchange or to be listed in a stock exchange or any other mode influencing the investment decision is termed as a research report.
He is a person who prepares or publishes content of the research report, provide research report, make buy/sell/hold recommendation.
The following disclosures should be made:
A research analyst/research entity should use the term research analyst after its name with the SEBI registration number.
Material information, including the name of the entity/individual research analyst, SEBI registration number, business activity details, T&C, associate details, and such other information, should be disclosed, which will help clients to take investment decisions.
A research analyst/research entity is required to disclose if such analyst, research entity, or his/her associates/relatives has:
A research analyst/research entity is required to disclose whether it or its associates in the last 12 months have:
This forms another part of disclosure in research reports where the research analyst should also disclose if they have served as an officer, director or an employee of the subject company.
The research analyst should disclose if they have engaged in the marketing activity for the subject company.
The research analyst/research entity should ensure that the facts in the research report are taken from a reliable source. Additionally, the terms used to give research recommendation has to be well defined thus will help to avoid any ambiguity. The source of information for making the research report has to be well documented and maintained in records by the research entity or by the research analyst.
If the research analyst/research entity uses the rating system, they are required to define the meaning of each rating with the time horizon and benchmarks on which the rating is used.
If a research report has a rating or price target for securities of the subject company for minimum one year, then such report should also contain the graph of daily closing of such securities for the period assigned or for 3 years period, whichever is shorter.
A research report has to be duly signed, and date should be mentioned. It can be maintained in electronic or physical form, and it shall be preserved for 5 years. If the reports are maintained in electronic form, then it must be signed digitally.
There are certain Dos & Don’ts that must be kept in mind:
The above-mentioned disclosure in research reports is essential and should comply with the SEBI regulations. Those individuals and entities who engage in extending recommendations to their clients through research reports should register with SEBI and comply with its provisions.
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