November 18, 2015

Stock brokerages told to give contrary views

Market regulator Securities and Exchange Board of India (Sebi) has recently clarified that brokerage houses that have both fundamental as well as technical analysts teams coming out with reports with contrary views on a particular stock, then they should state it upfront to their clients. Sebi wants the stock brokerages to publish the contrary views since fundamental analysts track stock movements on the basis of a longer term horizon while the shorter term outlook of technical analysts may be different for the same stock and its target price may also vary.

Sebi issued the clarification after a brokerage firm sought its directive on the matter under Sebi Informal guidance scheme 2013. According to Rule 18 (9) of Sebi (research analyst) regulations, brokerage houses shall not issue or use a research report that is not consistent with the views of individuals employed as research analyst regarding a particular company.

But now, Sebi has clarified that if individual employees in different teams of the research entity hold contrary views, then the research analyst should publish the report identifying the views of the different teams, without altering the same. “Now when brokerages are giving target prices for a stock and if they vary with fundamental and technical analysts then they will have to state in their reports to avoid confusion,” says Vinod Nair, head of fundamental research at GeojitBNP Paribas Financial Services.


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