Chapter 10: NISM-XV Exam Prep
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Day 46: NISM-XV Module 5 — Ethics & Compliance
Integrity is the whole job — the exam tests if you understand why
2 min read
📖 Ray's Temptation
Ray is a SEBI-registered Research Analyst. A company's investor relations head calls: "We'll pay ₹5 lakh if you write a positive research report on us. Just make the numbers work."
Ray knows exactly what this is: paid promotion disguised as independent research. Illegal. Career-ending if caught. More importantly — wrong.
Ray declined. Because integrity is not optional in this profession — it IS the profession. ⚖️
Ray is a SEBI-registered Research Analyst. A company's investor relations head calls: "We'll pay ₹5 lakh if you write a positive research report on us. Just make the numbers work."
Ray knows exactly what this is: paid promotion disguised as independent research. Illegal. Career-ending if caught. More importantly — wrong.
Ray declined. Because integrity is not optional in this profession — it IS the profession. ⚖️
Code of Conduct for Research Analysts
SEBI (RA) Regulations Schedule C — every RA must follow:
✅ Independence: Research must be objective and free from external influence
✅ Integrity: Misleading, fraudulent, or manipulative content is banned
✅ Fair Dealing: All clients receive equal treatment
✅ Competence: Continuous learning and skill maintenance
✅ Confidentiality: Client information must be protected
✅ Disclosure: All conflicts of interest must be declared
✅ Independence: Research must be objective and free from external influence
✅ Integrity: Misleading, fraudulent, or manipulative content is banned
✅ Fair Dealing: All clients receive equal treatment
✅ Competence: Continuous learning and skill maintenance
✅ Confidentiality: Client information must be protected
✅ Disclosure: All conflicts of interest must be declared
Prohibited Activities — Exam Loves These!
| Activity | Why It's Illegal |
|---|---|
| Front Running | Trading ahead of a client order to profit from anticipated price move |
| Insider Trading | Trading on Unpublished Price Sensitive Information (UPSI) |
| Market Manipulation | Artificially pumping or dumping stock prices |
| Churning | Excessive client trading to generate brokerage commissions |
| Misleading Research | Publishing paid promotional content as independent analysis |
Insider Trading — The Exam's Favourite Topic
UPSI = Unpublished Price Sensitive Information
Examples of UPSI:
• Quarterly results (before release) • Mergers & Acquisitions news
• Major order wins/losses • Change of key management
• Bankruptcy or restructuring filing
SEBI (PIT) Regulations 2015 = Prohibition of Insider Trading
Trading Window: Closed 48 hours before results → until 48 hours after results are made public.
Examples of UPSI:
• Quarterly results (before release) • Mergers & Acquisitions news
• Major order wins/losses • Change of key management
• Bankruptcy or restructuring filing
SEBI (PIT) Regulations 2015 = Prohibition of Insider Trading
Trading Window: Closed 48 hours before results → until 48 hours after results are made public.
KYC — Know Your Customer
Mandatory under PMLA (Prevention of Money Laundering Act) 2002
Every broker, DP, and RA must collect:
✅ PAN Card (mandatory for stock market transactions)
✅ Address Proof (Aadhaar, passport, or driving licence)
✅ Bank account details
✅ Risk profile assessment
Risk-based KYC: Higher-risk clients require more extensive documentation.
Every broker, DP, and RA must collect:
✅ PAN Card (mandatory for stock market transactions)
✅ Address Proof (Aadhaar, passport, or driving licence)
✅ Bank account details
✅ Risk profile assessment
Risk-based KYC: Higher-risk clients require more extensive documentation.
🎯 Takeaway:
RA Code of Conduct: independence, integrity, fair dealing, competence. Front running, insider trading, market manipulation = prohibited and examined heavily. UPSI = unpublished price sensitive information = cannot trade on. KYC mandatory for all. Tomorrow: Portfolio Theory!
RA Code of Conduct: independence, integrity, fair dealing, competence. Front running, insider trading, market manipulation = prohibited and examined heavily. UPSI = unpublished price sensitive information = cannot trade on. KYC mandatory for all. Tomorrow: Portfolio Theory!