November 18, 2015

Timeline for analysts to trade in recommended stock issued

Equities and commodities market regulator SEBI has reiterated that research analysts — be it fundamental or technical — cannot deal/trade in securities that they recommend/ follow in their research reports, 30 days before and five days after publishing a report.
Stress on uniformity
SEBI clarified in an informal guidance to Geojit BNP Paribas Financial Services that research entities shall not issue a research report that is not consistent with the views of individuals employed as analysts in a company.
SEBI added that in case contrarian views were held by research analysts employed in different teams of the research entity, the entity has to publish the report identifying the views of the different teams without altering them.
The genesis of the issue lies in the fact that fundamental analysis is used to decide whether to buy a particular stock and technical analysis to decide when to buy and when to sell. Given the different nature of both the analyses, situations occur when a fundamental analyst gives a buy call on a stock while a technical analyst gives a sell call on the same stock.
It also happens that while the retail research team of a brokerage house has a buy call on a scrip, the institutional research team may recommend otherwise.

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