The Securities and Exchange Board of India (SEBI) has made significant changes to the Research Analysts (RA) Regulations, 2014, through its latest amendment. These updates aim to broaden the scope of research services while ensuring stricter compliance and transparency. Here's a simplified breakdown of the key changes:
a) Definition and Scope of Research Analysts
Revised Definition:
A research analyst is now defined as someone who provides research services for consideration (payment or any economic benefit). This includes part-time research analysts.
Expanded Scope:
Research services now cover:
- Recommending model portfolios.
- Providing trading calls (intraday or ultra-short-term recommendations).
- Any other similar services.
Impact:
Anyone offering model portfolios or intraday trading calls must register as a research analyst with SEBI.
b) Qualifications and Certifications
A graduate degree in finance-related fields (like commerce, economics, or capital markets) is now sufficient for becoming a research analyst.
Individuals associated with research services must also have a graduate degree in any discipline and must clear the NISM Research Analyst Certification.
Impact:
Simpler eligibility criteria make it easier for aspiring analysts to enter the field.
Deposit Requirements
- Research analysts must maintain a deposit with a scheduled bank (marked as lien in favor of SEBI) instead of meeting a net-worth requirement.
- Details on deposit amounts are yet to be issued by SEBI.
Impact:
This ensures better financial accountability without relying solely on net worth.
c) Introduction of Part-Time Research Analysts
SEBI now recognizes part-time research analysts, who can provide research services while engaging in other businesses or jobs (unrelated to securities).
Key Rules:
- Must use the term “part-time research analyst” in all communication.
- Can serve a maximum of 75 clients at a time.
Impact:
This flexibility opens up opportunities for professionals to offer research services alongside their primary jobs.
d) Record Maintenance Requirements
RAs must now maintain:
- KYC records of paid clients.
- A register with client details, services provided, and fees charged.
- Communication records (emails, call recordings) with all clients.
- Terms and conditions of services, along with client consent.
Impact:
Ensures greater transparency and accountability.
e) Compliance Officer Appointment
- All RAs (including LLPs and partnerships) must appoint a Compliance Officer to ensure regulatory adherence.
- Can be an external professional (CS/CA/CMA) who has cleared the NISM certification.
Impact:
Encourages better compliance monitoring without needing in-house personnel.
f) Segregation of Research and Distribution Services
- Individual RAs or their family members cannot provide both research and distribution services to the same client.
- For non-individual RAs, this rule applies at the group level.
Impact:
Prevents conflicts of interest between advisory and distribution roles.
g) Other Key Updates
- Individual Investment Advisers (IAs) can now apply for an RA license.
- RAs must disclose the use of AI tools in their research.
- Mandatory for RAs to maintain a functional website.
- Audit reports must now be submitted to SEBI.
These amendments bring more opportunities for research analysts by expanding their scope of services (like model portfolios and trading calls) while ensuring better compliance and transparency. However, analysts must adapt to new challenges, such as stricter record-keeping and client segregation.
Stay tuned for further clarifications from SEBI on these updates!
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