After a complete regulatory overhaul in Investment Advisory regulations SEBI is soon expected to come out with regulatory overhaul for Research Analyst space also. There is a greater need to align you with the regulation and be on the right side of the regulation as the regulator prepares to launch a review of regulatory compliance pertaining to Research analyst space, which has been kept in a relatively lower level of regulatory oversight till now. However, move of Registered Investment advisors towards getting themselves registered as Research Analysts has made the above said outcome more prominent.
The whole purpose of this is to make you aware about the compliance requirements, which is currently applicable to you as a SEBI Registered Research Analyst. Let us help you ease the burden of compliance to some extent so that you can concentrate on your core activities, which itself is a big challenge in the new scenario. Here is a briefing of the things which you primarily need to take care of to comply with the SEBI Research Analyst Regulations 2014:
Regulation 7: Qualification and certification requirement RA need to ensure that they and/ their partners / their employees offering Research report or stock recommendations shall fulfil the qualification and certification criteria at all times.
Regulation 8: Capital adequacy RA needs to have requisite net-worth throughout the tenure of its registration as a Research Analyst. For individual it’s Rs. 1 Lakh and for Body Corporate its Rs. 25 lakhs.
Regulation 11: Renewal of certificate. Every five year pay the renewal fee and get it renewed
Regulation 13: Conditions of certificate RA needs to inform the board in writing if any information or particulars previously submitted to the Board are found to be false or misleading in any material particular or if there is any material change in the information already submitted; RA should use the term ‘Research Analyst’ in all their correspondences with their clients.
Regulation 15: Establishing internal policies and procedures. RA should have written internal policies and control procedures governing the dealing and trading by any research analyst.
Regulation 16: Limitations on trading by research analysts. RA Should ensure to have adequate limitations on trading by research analysts
Regulation 19: Disclosures RA regulations stipulate various disclosures to be made by Research analysts with respect to research report, stock recommendations and public appearance. RA should ensure to make all the relevant disclosure in all its research reports, stock recommendation and public appearances.
Regulation 21: Recommendations in public media. In case, Research Analyst or Director or employee of Research Entity appears in public media and make any recommendation, the disclosure of his / its name, registration status and details of financial interest shall be invariably made at the time of making such recommendation.
Regulation 24: General responsibility. RA Should: Maintain an arms-length relationship between its research activity and other activities. Have a Code of Conduct policy and should ensure that it is followed. Take prior approval from the Board in case of change in control of the research analyst or research entity
Regulation 25: Maintenance of records. RA should ensure that the signed copies of below documents are maintained for last five years and if the documents are kept electronically, they should be digitally signed: Research Reports; Research recommendation provided; Rationale for arriving at research recommendation; Record of public appearance with Date, video link, venue/source;
Regulation 25 (3) : Annual Compliance Audit: RA (Individuals as well as Body Corporates) should conduct yearly audit in respect of compliance with RA regulations. Annual compliance audit should not just be a tick audit, but it should help you in identifying the gaps in the relevant compliances applicable and taking corrective measures. Redressal of client grievances RA should have a process for grievance redressal of its clients. RA should be registered on SCORES, if not already registered. The physical office of RA should display the contact details of persons to whom clients can contact in case of any complaints along with the option of filing the complaint on SCORES with its link.
After a year full of challenges, you’re likely excited to start fresh in a new financial year that will (hopefully!) feel a lot less chaotic. However, due to fresh wave of Covid-19, the coming year is likely to see high volatility in financial markets. In the face of adversity, take a leap of faith and begin this New Financial Year by believing in your ability to thrive. We would be happy to be a part of your journey and watch your thrive.
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Disclaimer: The views and opinions expressed herein are my personal views and opinions and do not necessarily reflect the official policy and position of any other agency, organization, employer or company. Assumptions made in the analysis are not of the position of any entity other than me. I make no representations as to accuracy, completeness, correctness, suitability or validity of any information and will not be liable for any errors, omissions or damages arising from its use. It is reader’s responsibility to verify their own facts.
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