Fundamental as well as technical analysts are not allowed to trade in the securities they recommend to investors in a research report, 30 days before and five days after the publication of such report, according to market regulator Sebi.
Fundamental analysts attempt to study everything that can affect the security's value, including macro-economic factors and company-specific factors, while a technical analyst issues short-term recommendations.
"Limitation on trading as specified under ...'Research Analyst' regulations is applicable to both fundamental as well as technical analysts, whether acting independently as a research analyst or employed a research analyst by research entity," Sebi said.
According to Sebi regulations, independent research analysts, individuals employed as research analyst by a research entity or their associates will not deal or trade in the securities that the analyst recommends or follow 30 days before and five days after the publication of the report.
As per norms, 'Research Analyst' or research entity will not use a research report that is not consistent with the views of individuals employed as research analyst regarding a subject company.
Technical analyst will not be able to give contrary recommendations regarding a company, when the views already provided by the fundamental analysts are still running.
However, in an "interpretive letter", Sebi said: "If individual employees employed in different teams of the research analyst/entity hold contrary views, then the research analyst/entity should publish the report identifying the views of different teams, without altering the same."
These views have been expressed by Sebi in an "interpretive letter" sought by a registered research entity Geojit BNP Paribas Financial Services that had demanded some clarification.
The company had sought the interpretive letter under the market regulator's informal guidance scheme with regard to applicability of Research Analyst Regulations.
In its application to Sebi, the company said that there are a couple of areas where it is facing difficulties in the regulation considering the nature of the activity of technical analysts as opposed to fundamental analysts.
