SEBI (Research Analyst) (Third Amendment) Regulations, 2024

SEBI (Research Analyst) (Third Amendment) Regulations, 2024. On December 16, 2024, the Securities and Exchange Board of India (SEBI) introduced the third amendment to the SEBI (Research Analysts) Regulations, 2014, refining the regulatory framework for Research Analysts. The changes include new definitions, clarified provisions, and expanded responsibilities to ensure enhanced compliance and operational efficiency.
Introduction of New Definitions
The amendment incorporates several new definitions under Regulation 2(1) to provide greater clarity. Key terms introduced include:
-Family of an individual research analyst
-Non-individual entities, such as partnership firms and limited liability partnerships
-Part-time research analysts
-Persons associated with research services
-Research services
-Trading calls 
Revised Definition of Research Analyst
The definition of a research analyst under clause (t) of Regulation 2(1) has been simplified. The term now refers to a person providing research services for consideration, omitting the detailed description of tasks previously included in the definition.
Eligibility for Registration
-Regulation 6(i): Partnership firms are now eligible to apply for a certificate of registration, expanding beyond individuals, corporate bodies, and limited liability partnerships.
-Regulations 6(ii) to 6(v): The requirements for qualified and certified personnel have been broadened. Applicants must now meet the revised qualifications under Regulation 7. 
Amendments to Qualification Criteria
-Regulation 7(1)(i): Only qualifications, degrees, or diplomas from recognized institutions (domestic or foreign) are valid.
-Certain qualifications have been excluded to align with the updated standards for research analysts. 
Capital Adequacy Replaced with Deposit
Regulation 8 replaces the term capital adequacy with deposit. Research analysts must maintain a specified deposit as per SEBI's guidelines, ensuring financial stability.
Client Limit for Part-Time Research Analysts
Under Regulation 13(iv), part-time research analysts are now restricted to a maximum of 75 clients at any given time.
Use of Artificial Intelligence Disclosure
A new clause (Regulation 19(vii)) mandates that research analysts disclose their use of Artificial Intelligence tools in providing research services to clients.
Functional Website Requirements
Regulation 19A requires research analysts or entities to maintain a functional website containing specific details as prescribed by SEBI.
Enhanced Reporting Standards
A new clause (Regulation 20(4)) has been introduced, obligating research analysts to substantiate their recommendations in research reports with relevant data and analysis.
Additional Responsibilities and Records
-Regulation 24: Three new sub-clauses outline expanded responsibilities for research analysts.
-Regulation 25(1): Analysts must now maintain additional types of records to ensure transparency and accountability. 
Client-Level Segregation of Services
Regulation 26C introduces the requirement for research analysts to ensure client-level segregation of research services and distribution activities.
New Form for Part-Time Research Analysts
A new Form C has been added to Schedule 1, providing a template for the certificate of registration for part-time research analysts.
SEBI has introduced the concept of a "part-time research analyst," which refers to an individual or partnership firm engaged in providing research services while also being involved in other business activities or employment, provided these activities do not conflict with the research services.
Compliance Requirements for Part-Time Research Analysts
Part-time research analysts are required to comply with all the application compliance requirements applicable to full-time research analysts. There are no exemptions. A part-time RA can service up to 75 clients at a time. If this number exceeds, the individual must transition to a full-time RA.
Restrictions on Distribution Services for Research Analysts
An individual research analyst cannot provide mutual fund distribution services. Additionally, a conflict of interest arises if any family member of the RA is involved in distribution services for the same client. This rule also applies to non-individual RAs and their affiliated entities.
Eligibility Criteria for Research Analyst License
To apply for a research analyst license, a graduate with a degree in specified fields (finance, business management, economics, etc.) can apply, with no prior experience required. The degree must be from a recognized institution. Completion of NISM Series XV certification remains mandatory.
Qualification Requirements for Employees and Associates
Employees and associates engaged in providing research services, including relationship managers and client-facing staff, must fulfill qualification requirements, including a graduate degree and NISM certification. This requirement applies to both individual and non-individual research analysts.
Principal Officer (PO) Requirements for Non-Individual Research Analysts
Non-individual research analysts must designate a Principal Officer (PO), responsible for overseeing operations and ensuring compliance. The PO must meet the qualification and certification requirements. In some cases, a business or unit head can be designated as PO.
Appointment of Compliance Officer
All research analysts, including partnership firms, are required to appoint a compliance officer. SEBI allows non-individual RAs to appoint an independent professional (Company Secretary, Chartered Accountant, Cost Accountant) to fulfill this role. The principal officer is still responsible for monitoring compliance.
Additional Compliance Requirements for Clients
-Client Limitations: There is no client limit for individual or non-individual RAs, but part-time RAs are restricted to 75 clients.
-KYC Documentation: RAs must obtain KYC documents from fee-paying clients and maintain records.
-Client Agreements: While SEBI does not mandate formal agreements, RAs must disclose terms and conditions to clients and obtain their consent.
-Record Keeping: RAs must keep records of all communications, including emails and call recordings, with clients. 
Other Compliance Requirements
-Website: Research analysts are required to maintain a functional website with specified details.
-Artificial Intelligence: RAs using AI tools must disclose their extent of use to clients.
-Model Portfolio Services: Regulations around model portfolio services are still awaited from SEBI, though they were mentioned in the consultation paper. 
SEBI Approves Change in Control at Religare Broking
The Securities and Exchange Board of India (SEBI) has given its approval for a change in control at Religare Stock Broking, a fully owned subsidiary of Religare Enterprises Ltd (REL). According to an exchange filing by REL, SEBI has granted prior approval for the modification of the shareholding structure, leading to a shift in control of Religare Broking.
Conclusion
The Securities and Exchange Board of India (Sebi) has introduced major changes to the regulations governing investment advisors and research analysts. These amendments, aimed at reducing compliance burdens, include relaxing qualification, experience, and net worth requirements, as well as eliminating the mandatory periodic examination for professionals. The new norms also permit part-time registrations for both investment advisors and research analysts, while excluding trading calls from the definition of "investment advice." These changes are expected to encourage greater participation in the sector, especially as the number of registered investment advisors has fallen below 1000.
Frequently Asked Questions (FAQs)
1. Who is eligible for SEBI certification? 
Ans. To be eligible for SEBI certification, candidates must be between 21 and 30 years of age. For the General stream, they should hold a Master's Degree in any discipline, or a Bachelor's Degree in Law, Engineering, or qualifications like CA, CFA, CS, or Cost Accountant from a recognized university.
2. What is the salary of a SEBI certified research analyst? 
Ans. The salary of a SEBI-certified research analyst typically ranges from Rs. 1.7 Crore to Rs.1.9 Crore per year.
3. What is the benefit of a SEBI registered research analyst? 
Ans. A SEBI-registered research analyst has access to exclusive information not available to the general public, which helps investors make informed decisions and improve their financial portfolio.
4. Who is the best SEBI registered research analyst? 
Ans. One of the top SEBI-registered research analysts in India is Niveshartha, renowned for providing stock market tips and recommendations in equity, futures, options, and commodities.
5. Who is eligible for the NISM research analyst exam? 
Ans. The NISM research analyst exam is open to anyone above 18 years of age, regardless of their educational background, to validate their expertise in financial markets and securities.

On December 16, 2024, the Securities and Exchange Board of India (SEBI) introduced the third amendment to the SEBI (Research Analysts) Regulations, 2014, refining the regulatory framework for Research Analysts. The changes include new definitions, clarified provisions, and expanded responsibilities to ensure enhanced compliance and operational efficiency.

Introduction of New Definitions

The amendment incorporates several new definitions under Regulation 2(1) to provide greater clarity. Key terms introduced include:

-Family of an individual research analyst

-Non-individual entities, such as partnership firms and limited liability partnerships

-Part-time research analysts

-Persons associated with research services

-Research services

-Trading calls

Revised Definition of Research Analyst

The definition of a research analyst under clause (t) of Regulation 2(1) has been simplified. The term now refers to a person providing research services for consideration, omitting the detailed description of tasks previously included in the definition.

Eligibility for Registration

-Regulation 6(i): Partnership firms are now eligible to apply for a certificate of registration, expanding beyond individuals, corporate bodies, and limited liability partnerships.

-Regulations 6(ii) to 6(v): The requirements for qualified and certified personnel have been broadened. Applicants must now meet the revised qualifications under Regulation 7.

Amendments to Qualification Criteria

-Regulation 7(1)(i): Only qualifications, degrees, or diplomas from recognized institutions (domestic or foreign) are valid.

-Certain qualifications have been excluded to align with the updated standards for research analysts.

Capital Adequacy Replaced with Deposit

Regulation 8 replaces the term capital adequacy with deposit. Research analysts must maintain a specified deposit as per SEBI's guidelines, ensuring financial stability.

Client Limit for Part-Time Research Analysts

Under Regulation 13(iv), part-time research analysts are now restricted to a maximum of 75 clients at any given time.

Use of Artificial Intelligence Disclosure

A new clause (Regulation 19(vii)) mandates that research analysts disclose their use of Artificial Intelligence tools in providing research services to clients.

Functional Website Requirements

Regulation 19A requires research analysts or entities to maintain a functional website containing specific details as prescribed by SEBI.

Enhanced Reporting Standards

A new clause (Regulation 20(4)) has been introduced, obligating research analysts to substantiate their recommendations in research reports with relevant data and analysis.

Additional Responsibilities and Records

-Regulation 24: Three new sub-clauses outline expanded responsibilities for research analysts.

-Regulation 25(1): Analysts must now maintain additional types of records to ensure transparency and accountability.

Client-Level Segregation of Services

Regulation 26C introduces the requirement for research analysts to ensure client-level segregation of research services and distribution activities.

New Form for Part-Time Research Analysts

A new Form C has been added to Schedule 1, providing a template for the certificate of registration for part-time research analysts.

SEBI has introduced the concept of a "part-time research analyst," which refers to an individual or partnership firm engaged in providing research services while also being involved in other business activities or employment, provided these activities do not conflict with the research services.

Compliance Requirements for Part-Time Research Analysts

Part-time research analysts are required to comply with all the application compliance requirements applicable to full-time research analysts. There are no exemptions. A part-time RA can service up to 75 clients at a time. If this number exceeds, the individual must transition to a full-time RA.

Restrictions on Distribution Services for Research Analysts

An individual research analyst cannot provide mutual fund distribution services. Additionally, a conflict of interest arises if any family member of the RA is involved in distribution services for the same client. This rule also applies to non-individual RAs and their affiliated entities.

Eligibility Criteria for Research Analyst License

To apply for a research analyst license, a graduate with a degree in specified fields (finance, business management, economics, etc.) can apply, with no prior experience required. The degree must be from a recognized institution. Completion of NISM Series XV certification remains mandatory.

Qualification Requirements for Employees and Associates

Employees and associates engaged in providing research services, including relationship managers and client-facing staff, must fulfill qualification requirements, including a graduate degree and NISM certification. This requirement applies to both individual and non-individual research analysts.

Principal Officer (PO) Requirements for Non-Individual Research Analysts

Non-individual research analysts must designate a Principal Officer (PO), responsible for overseeing operations and ensuring compliance. The PO must meet the qualification and certification requirements. In some cases, a business or unit head can be designated as PO.

Appointment of Compliance Officer

All research analysts, including partnership firms, are required to appoint a compliance officer. SEBI allows non-individual RAs to appoint an independent professional (Company Secretary, Chartered Accountant, Cost Accountant) to fulfill this role. The principal officer is still responsible for monitoring compliance.

Additional Compliance Requirements for Clients

-Client Limitations: There is no client limit for individual or non-individual RAs, but part-time RAs are restricted to 75 clients.

-KYC Documentation: RAs must obtain KYC documents from fee-paying clients and maintain records.

-Client Agreements: While SEBI does not mandate formal agreements, RAs must disclose terms and conditions to clients and obtain their consent.

-Record Keeping: RAs must keep records of all communications, including emails and call recordings, with clients.

Other Compliance Requirements

-Website: Research analysts are required to maintain a functional website with specified details.

-Artificial Intelligence: RAs using AI tools must disclose their extent of use to clients.

-Model Portfolio Services: Regulations around model portfolio services are still awaited from SEBI, though they were mentioned in the consultation paper.

SEBI Approves Change in Control at Religare Broking

The Securities and Exchange Board of India (SEBI) has given its approval for a change in control at Religare Stock Broking, a fully owned subsidiary of Religare Enterprises Ltd (REL). According to an exchange filing by REL, SEBI has granted prior approval for the modification of the shareholding structure, leading to a shift in control of Religare Broking.

Conclusion

The Securities and Exchange Board of India (Sebi) has introduced major changes to the regulations governing investment advisors and research analysts. These amendments, aimed at reducing compliance burdens, include relaxing qualification, experience, and net worth requirements, as well as eliminating the mandatory periodic examination for professionals. The new norms also permit part-time registrations for both investment advisors and research analysts, while excluding trading calls from the definition of "investment advice." These changes are expected to encourage greater participation in the sector, especially as the number of registered investment advisors has fallen below 1000.

Frequently Asked Questions (FAQs)

1. Who is eligible for SEBI certification?

Ans. To be eligible for SEBI certification, candidates must be between 21 and 30 years of age. For the General stream, they should hold a Master's Degree in any discipline, or a Bachelor's Degree in Law, Engineering, or qualifications like CA, CFA, CS, or Cost Accountant from a recognized university.

2. What is the salary of a SEBI certified research analyst?

Ans. The salary of a SEBI-certified research analyst typically ranges from Rs. 1.7 Crore to Rs.1.9 Crore per year.

3. What is the benefit of a SEBI registered research analyst?

Ans. A SEBI-registered research analyst has access to exclusive information not available to the general public, which helps investors make informed decisions and improve their financial portfolio.

4. Who is the best SEBI registered research analyst?

Ans. One of the top SEBI-registered research analysts in India is Niveshartha, renowned for providing stock market tips and recommendations in equity, futures, options, and commodities.

5. Who is eligible for the NISM research analyst exam?

Ans. The NISM research analyst exam is open to anyone above 18 years of age, regardless of their educational background, to validate their expertise in financial markets and securities.