Explore the compensation regulations for research analysts under SEBI (Research Analysts) Regulations, 2014. Learn about restrictions, segregation of services, and compliance requirements.
In one of our previous articles, we described the various services mentioned in the regulations.
Link of that article: https://taxguru.in/sebi/services-sebi-research-analysts-regulations-2014.html
To help you understand the compensation that a research entity can offer to its research analysts, we have simplified the information in this article.
*•*Research entity shall “not” pay any bonus, salary or other form of compensation to any individual employed as research analyst.
A research analyst shall be paid compensation only for his services as a research analyst and “not” any other service like merchant banking or investment banking or brokerage services transactions.
For example –
Gain More By Research Private Ltd is a research entity, and Mr. Sharma is one of its research analysts. The company will only compensate Mr. Sharma for his research analyst services and will not provide or should not provide any compensation for other services such as merchant banking, investment banking, or brokerage services.
The question arises: can Mr. Sharma provide merchant banking, investment banking, or brokerage services within the same entity?
Yes, Mr. Sharma can provide merchant banking, investment banking, or brokerage services within the same entity, but there should be a clear segregation of these activities.
*•* All research analysts’ compensation shall be reviewed, documented, and approved on an annual basis by the board of directors or a committee appointed by the research entity.”
Things to be noted in this context are:
1. “No” representation from merchant banking or investment banking or brokerage services division should part of Board of Directors approving the compensation of the Research Analyst.
2. The Board of Directors should only consider Research Analyst services and exclude contributions from any other services when determining Research Analyst compensation.
3. This is also one of the firm’s compliance requirements that must be fulfilled.
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