Regulation 36 - Research Entities - International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2025

36. Research Entities (1) A research entity shall have written internal policies and control procedures governing the dealing and trading by any employee for: (a) addressing actual or potential conflict of interest arising from such dealings or trading of securities of subject company; (b) promoting objective and reliable research that reflects unbiased view of research analyst; and (c) preventing the use of research report or research analysis to manipulate the financial market. (2) A research entity shall ensure that the procedures or controls designed to manage actual or potential conflicts of interest are based on the nature, scale and complexity of the business. (3) The internal policy should ensure that the conflicts of interest are identified and adequately addressed so that the quality of the research report is not compromised. (4) A research entity shall have in place appropriate mechanisms to ensure independence of its research activities from its other business activities. (5) A research entity shall establish, implement and enforce policies and procedures for personal trading by its analysts and their associates. (6) Personal trading activities of the individuals employed as research analyst by research entity shall be monitored, recorded and wherever necessary, shall be subject to a formal approval process. (7) The policy shall ensure that an analyst does not trade for himself in a manner that is contrary to his outstanding research recommendations, except in special circumstances, where the analyst shall be required to obtain prior written approval for each trade. (8) A research entity shall ensure that the remuneration of analysts is structured in a way to avoid any bias in his research analyses and recommendations. (9) A research entity shall ensure that there are robust and effective barriers between the entity and other business dealings of the entity or its group entity to ensure independence and objectivity of the research reports. (10) A research entity shall not provide any promise or assurance of favourable review in its research report to a company or industry or sector or group of companies or business group as consideration to commence or influence a business relationship or for the receipt of compensation or other benefits. (11) A research entity shall ensure that the information provided in the report is complete, concise and specific such that investors can understand the actual or potential conflicts of interest and their likely impact on the quality of the research report published. (12) A research entity shall disclose any material interest in the report that may create a potential conflict of interest and thereby affect the ability of the entity to maintain independence and objectivity: Explanation: The research entity shall disclose in the report if the research entity or the research analyst or his associate or his relative has: (a) any material financial interest in the subject company and the nature of such financial interest; (b) beneficial ownership of one or more per cent. of the securities of the subject company; (c) any material business relationship with the subject company over the past 12 months that may result in conflict of interest; and (d) any other material conflict of interest relating to the subject company. (13) A research entity shall take steps to ensure that facts in its research reports are based on reliable information and shall define the terms used in making recommendations, and these terms shall be consistently used. (14) A research entity shall have adequate documentary basis, supported by research, for preparing a research report. (15) Where a research entity employs a rating system, it must clearly define the meaning of each such rating including the time horizon and benchmarks on which a rating is based.