Research analysts (RAs) can expect some relief on the guidelines issued by the Securities and Exchange Board of India (Sebi) last month, particularly on the one capping the advance collection of fee to three months, said sources.
This cap was the most contentious issue and had led several well-respected RAs to announce their intent to surrender their registrations and wind up operations. Industry sources say that the cap is most likely to be extended to six months or even a year.
Moneycontrol has learnt that the RAs' industry body, the Association of Registered Research Analysts of India (ARRAI), have been in conversation with Sebi since the guidelines were released on January 8. The association has not confirmed any of the developments and sources say that the discussions are still ongoing.
Also read: Research analysts protest SEBI's new norms, some announce quitting the profession
Moneycontrol had written how RAs had protested against some of these rules.
Sources now say that the regulator has been proactive in collaborating with the industry, and is likely to set guidelines that are more practical and will safeguard investors at the same time.
Other changes
The other guidelines that are likely to be changed are on the need to get terms and conditions signed by clients, either in person or through an e-signature facility.
Many RAs had said that providing e-signature facility may be difficult. Therefore, the regulator is now considering a one-time password (OTP)-led authentication for new clients and an email confirmation for existing clients.
RAs had also asked for more clarity on the possible requirement that all their employees, including those from the sales and marketing teams, have a National Institute of Securities Market (NISM) certification. Sources said that the regulator will soon issue an FAQ, clarifying this point, as to which employees would need to take this certification and who all need not.
What isn't likely to change
Among the requests that were put forth and are not likely to change are the cap on the annual fee that can be collected and the need for know-your-client (KYC) requirements.
The guidelines had set the cap on on annual fee from a single family at Rs 1.51 lakh, when clients are individuals and from Hindu Undivided Families (HUFs). This limit does not apply to non-individual clients or accredited investors. RAs had said that it can be difficult to ascertain whether a new client is part of another, older client's family. To address this, some clarity may emerge on the definition of a family and which members will be included in its ambit, according to a source.
Under the guidelines, an RA is required to follow a specified KYC procedure when onboarding a client and maintain these records for five years or even longer, if there is a dispute and till it is resolved.
A few RAs had raised issue with this. They argue that maintaining records for so long may be difficult. But, according to a source, there is likely to not be any relaxation on this front since these requirements are necessary under the Prevention of Money Laundering Act (PMLA).
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