New York – If there was any doubt that the research industry was not reforming itself around the world, yesterday’s article relating the revised standards for the Indian equity analysts should dispel that doubt. SEBI (the Securities and Exchange Board of India) introduced new guidelines that would ban analysts from trading in a stock 30 days prior to and 5 days after the publication of a research report. This ban would extend to any derivative securities on the underlying stock. Comments are invited until April 15th.
The article is copied below:
SEBI Proposes Tough Norms for Equity Analysts
Press Trust of India
Monday, March 31, 2008 (Mumbai)
Concerned over the way the market analysts are influencing share prices, stock market regulator SEBI on Monday proposed to ban equity researchers from buying and selling shares of the concerned company 30 days before and five days after publication of the research report.
The Securities and Exchange Board of India (SEBI) wants the broking firms to maintain Chinese wall among it various activities like proprietary trading, investment banking and research.
“Trading members shall ensure that no research analysts may purchase or sell any security issued by a company that the research analyst follows or derivative of such securities, for a period beginning 30 calendar days before and five calendar days after the publication of a research report concerning the company,” SEBI said in its draft guidelines.
The market watchdog has chalked out draft guidelines on improving sales practice by exchange members and has invited comments from the public by April 15.
The draft also mandates the brokers to ensure that “no research analysts may purchase or sell any security or derivatives of such security in a manner inconsistent with the research analyst’s recommendations as reflected in the most recent research published by the member.”
It also prohibits brokers from offering favorable research or a specific price target to a company as consideration for the business.
Under the proposed norms, the brokers would also be required to fully disclose his and research analysts’ business interest in the concerned company.