
Attention Research Analysts: SEBI has updated its regulations, introducing some significant changes that will affect how you operate. SEBI had issued an amended regulation on 16th December, 2024.
Further, guidelines to the amended regulation are here. You can read the article by clicking on this link: Guidelines for Research Analysts.
These new guidelines are introduced to ensure more transparency and compliances. Let us take look on the changes and additional compliances that you must undertake to ensure compliance with the SEBI (Research Analysts) Regulations, 2014 (RA Regulations).
Let us simplify it for you-
What is the eligibility to be a SEBI registered Research Analysts and do the existing RA need to comply with it?
Well SEBI has already specified the same in its amended regulation issued on 16th December, 2024. Please click here to read the previous article on recent amendment.
No, the existing SEBI registered individual RAs, Principal officer of non-individual RAs or research entity, individuals employed as research analysts and partners of research analyst are not required to comply with the requirement. However, they will have to ensure that they are having a valid NISM certification for Research Analysts.
Please note that fresh NISM certificate shall be obtained before expiry of the validity of the existing certification.
What are new capital adequacy requirements?
Now, the RAs are requirement to maintain a deposit with scheduled bank instead of Net worth. The amount of deposit shall be decided on the basis of clients RA has and in the following manner:
Up to 150 clients: ₹1 lakh deposit
151 to 300 clients: ₹2 lakh deposit
301 to 1,000 clients: ₹5 lakh deposit
1,001 and above clients: ₹10 lakh deposit
This deposit will be marked as a lien in favour of the Research Analyst Administration and Supervisory Body (RAASB).
For existing clients, the same shall be complied by April 30, 2025 and for the new applicants shall comply with in from immediate effect.
Who shall be considered eligible for registration as part-time RA?
A person shall be considered eligible for part-time RA if it-
CA/CS/CMA providing statutory services.
Insurance Agent registered with IRDAI.
A professor or a teacher provided a ‘No Objection Certificate’ is procured from the respective employer, or someone who is engaged in education business or activity.
An architect, lawyer, doctor, etc.
Please note that a person who is engaged in business of providing recommendations/advice on assets like gold, silver, real estate, cryptocurrency shall not be eligible to be registered as part-time RA.
Few important points to consider here:
You will qualify for part-time RA only if you are engaged in business activity unrelated to securities market and does not involve money handling or fund management etc.
You cannot onboard more than 75 clients at any time and must follow the regulations that full-time RAs follow.
You need to clearly mention in all communication that you are a "part-time research analyst."
You must maintain arms-length relation between both the activities.
When you are raising invoice for your other business activities, please ensure to mention that ‘the invoice is related to services not under the purview of SEBI and no compliant can be raised to SEBI for services rendered therein.’ The font size of the same shall be minimum
4. What certifications are required to be obtained by the independent professional to act as a Compliance Officer?
The Compliance Officer can be an independent professional such as a Company Secretary (CS), Chartered Accountant (CA), or Cost Management Accountant (CMA), provided they hold the following NISM certification:
NISM-Series-XV: Research Analyst Certification Examination
NISM-Series-XV-B: Research Analyst Certification (Renewal) Examination,
NISM-Series-III A: Securities Intermediaries Compliance (Non-Fund) Certification
Examination
If you are a non-individual RA looking to appoint an external person as a Compliance Officer, you need to ensure that the professional all the three certifications. Further, you will have to submit an undertaking to RAASB stating that the principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by SEBI/RAASB.
What is the revised fee structure for RAs?
You can charge maximum up to ₹1,51,000 per annum per family. This fee limit is applicable for only individuals and Hindu Undivided Families (HUF) clients.
This fee limit is not applicable to non-individuals and accredited investors. You may charge the fees to them basis on the mutually agreed terms.
In case you are planning to charge advance fees from clients, you can charge them maximum up to one quarter. Further, in case the client want to discontinue with the services you will have to refund the proportionate amount back to the clients without charging any breakage fee.
Please note that for existing clients, you need to ensure compliance to this provision by June 30, 2025 and for new clients its effective with immediate effect.
How shall we ensure client level segregation?
The RA must ensure that a client level segregation is being maintained at group/family level between its RA activities and other activities. An annual certificate confirming the client level segregation shall be obtained by CA/CS/CMA or from auditor/ statutory auditor within 6 months from the end of financial year.
The RA must also ensure that there is a documented compliance and monitoring process in place to ensure effective client level segregation.
What are the terms and conditions for providing RA serviced and how shall the consent be taken from clients?
SEBI has introduced a detailed terms and conditions which should be given to the clients and consent must be taken on them. The RA cannot give services nor can charge fees to the clients unless the consent is taken on the terms and conditions.
In addition to the terms and conditions, Most Important Terms and Conditions (MITC) shall also be disclosed by the RAs while taking the consent.
Please note that SEBI is yet to issue the MITC.
The consent from the clients shall be taken either physically or through any other legally accepted mode including Digi locker enabled Aadhaar based e-signature facility.
# Examples of other legally accepted mode could be Digital Signature (DSCs), Electronic Signature like Docusign, Panda Doc etc.
For existing clients, the same shall be complied with by June 30, 2025.
How shall we record the conversation with the clients?
The RA shall ensure that the records of communication shall be maintained for all clients including prospective client prior to onboarding them. The same shall be recorded in the following manner:
Physical record written & signed by client,
Telephone recordings
Email from registered email id,
Record of SMS messages,
Any other legally verifiable record.
Please note that the conversation is maintained from the start till the time research services are being provided to the clients. The records shall be maintained for the period of 5 years.
The same shall be complied with by June 30, 2025
What are the new audit requirements?
Following are the new requirements under audit:
Every RA must get an annual compliance audit done within six months after the financial year ends and submit the report to RAASB within one month from the date of the audit report.
In case of any adverse findings, an Action Taken Report shall be submitted within one month from the date of the audit report or by 31st October of each year.
Obtain an annual certificate confirming client level segregation and submit the same with RAASB along with the annual compliance audit report.
Publish the audit report in the website along with the adverse filings and action taken against such adverse filings. The RA will now have to provide the audit reports to its clients as well.
Please note that all the applicable provisions under the new guidelines shall be considered for the annual compliance audit for the financial year ending 31st March, 2025.
Other important questions answered:
Who shall be a principal officer in a partnership firm?
Any one of the partners of the partnership firm shall be designated as a Principal Officer. In case, no partner is eligible then, the partnership shall apply for corporate license by September 30, 2025.
Can a RA offer model portfolio?
Yes, a RA can now offer model portfolio to its clients. However, SEBI has specified guidelines for the same which shall be complied with by June 30, 2025.
Who is responsible for the usage of the AI Tools?
If you are using AI tools in your research services, you’ll be fully responsible for:
the security, confidentiality, and integrity of client data.
compliance with all the laws relating to usage of AI tools.
disclose to your clients the extent of usage of AI tools in giving research services and the same shall be disclosed by April 30, 2025.
13. Do I need to maintain research reports for all my research services?
Yes, all research services should be backed by a research report containing relevant data and analysis forming the basis of your recommendations. You need to maintain a record of these reports and same shall be produced at the time of annual compliance audit.
Can I register both as a RA and an IA?
Yes, now individuals and partnership firms who are registered as Investment Advisers with SEBI can also apply for the RA license.
Here are the main points of the new rule:
You must follow the regulations for both Investment Advisers and Research Analysts separately.
Additionally, you will need to provide an undertaking stating that you will maintain a clear segregation of your services.
Is it mandatory to have a website?
It is now mandatory to have a fully functionable website which should have all the details as specified by SEBI.
Please ensure with the requirement by June 30, 2025.
For further queries, please contact us at anjalibansalcs@gmail.com.
Disclaimer: While every effort has been made to ensure the accuracy of this article, Anjali Bansal and Associates assumes no responsibility for any errors or omissions. This document does not substitute professional advice, and readers should seek guidance before acting on any information contained herein.
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