📚 PASS Research Analyst Certification Examination Difficulty: Beginner ℹ️ Info   ~5 min read
📌 Chapter 14.3 — Code of Conduct for Research Analysts

Imagine you are finalizing a comprehensive valuation model for a large-cap FMCG firm. You have meticulously adjusted your WACC 1 and projected healthy terminal growth rates, leading to a strong ‘Buy’ rating. Before hitting ‘publish,’ you must pause and address the regulatory requirement of disclosure. SEBI does not just want your opinion; it wants the investor to understand the potential biases embedded in that opinion, ensuring they can weigh your recommendation with necessary skepticism.

The requirement for disclosures is grounded in the principle of informed consent for the retail investor. You must explicitly state whether you or your associates hold any financial interest in the subject company. If your firm has acted as a lead manager or underwriter for the company’s recent IPO, or if your firm has received compensation for investment banking services within the last twelve months, this must be clearly highlighted.

This is not a formal administrative burden; it is a critical filter that allows the market to discern whether a recommendation is born of objective fundamental analysis or skewed by institutional relationships.

Consider a case where an analyst issues a ‘Buy’ recommendation on a technology firm. If that same analyst’s research house recently provided advisory services to the firm during a merger, the credibility of the ‘Buy’ is compromised if that relationship remains hidden. By mandating disclosure, SEBI ensures that the analyst’s incentives are aligned with transparency rather than hidden commission structures.

When writing your report, these disclosures must be placed in a prominent, easily readable location, typically at the beginning or end of the document, rather than buried in a footnote with illegible font size.

Ultimately, your valuation model is a subjective representation of future potential. Disclosures act as the guardrail for that subjectivity. By openly acknowledging potential conflicts—such as holding equity, acting as a market maker, or having close family members with significant holdings—you demonstrate that your professional judgment remains independent. Adhering to these standards effectively differentiates a credible research analyst from a mere market promoter in the eyes of both regulators and institutional clients.

Nuance

⚠️ Nuance
Candidates often mistakenly believe that disclosing a conflict of interest automatically disqualifies the research report. In reality, SEBI permits the publication of research even when conflicts exist, provided that the conflicts are transparently and fully disclosed to the public. The trap lies in thinking that ’neutrality’ means ’lack of connection,’ whereas the regulator is actually looking for the ‘honesty of connection’ through explicit, non-ambiguous disclosure.

Check Your Understanding

Practice Question 1

Which of the following disclosures is explicitly mandated by SEBI Research Analyst Regulations in a research report if the research house has received compensation from the subject company for non-investment banking services in the preceding 12 months?

Practice Question 2

An analyst is writing a report on ‘Company X.’ The analyst’s brother holds a 3% equity stake in ‘Company X.’ According to the SEBI (Research Analyst) Regulations, what is the correct course of action?

This is a companion read for Section 14.3 — Code of Conduct for Research Analysts from PASS Research Analyst Certification Examination by Akhilesh Gururani, available on Amazon Kindle.

Copyright © 2026 Akhilesh Gururani. All rights reserved.

  1. Weighted Average Cost of Capital (WACC) represents a firm’s average cost of capital from all sources, including equity and debt, used to discount future cash flows in valuation models. ↩︎