How to Write Disclosures and Rationale of Rating in Your Equity Research Report

In this article I’ll explain the importance of providing various disclosures and also the rationale of rating that you will provide in your equity research report.

Now that you have understood all the important segments of an equity research report, let’s come to the last segment.

This segment includes giving all the disclosures and also the rationale of the rating that you have provided in your equity research report.

It is always ethical to disclose if the equity research analyst owns any shares of the organization he is writing the equity research report on or if he has any vested interest in the organization.

Also always clarify that the document prepared by you does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction.

The information contained therein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such.

Always clarify that you shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in your report.

Specify that the document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

Please refer the below disclosure segment.

1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

Notice how the analyst has clarified that there is no conflict of interest that can bias his opinion on the grading recommendation of the company.

Further he has clarified that the opinions here are current opinions and they can change with change in environment or company performance.

Below is another example of a disclosure appendix in an equity research report:

1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

Again if you see the above disclaimer, see how clearly the analyst has specified that he, his directors and other employees of his company and its affiliates may hold long or short positions in the above mentioned company from time to time.

He has also specified that neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures nor other derivatives related to such securities.

Further he clarifies that while acting upon any information or analysis mentioned in this report, investors may please note that neither he nor any person connected with any associate companies accepts any liability arising from the use of this information and views mentioned in this document.

Below are some examples where the analysts have given a rationale for providing ratings to the company in their equity research report.

1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

Giving a rationale always helps as it gives the reader or investor absolute clarity as to the basis of the ratings.

Hope you have understood this segment of the equity research report.

This is the last segment of the report and also a very important segment as it insures you of any damage claims.

Make sure you take some time out to frame this segment properly.

Key Takeaway

I hope that you have understood the importance of providing disclosures and ratings in your equity research report.

It’s really important to be transparent to your readers and disclose your certification, rationale of rating, stake that you have in the company, any relationship with the company and so on.

I hope you enjoyed the article. If you’ve any queries, please let me know.

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1x1.trans How to Write Disclosures and Rationale of Rating in Your Equity Research Report

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