SEBI-registered research analysts face freezing of bank accounts, believe regulator's recent proposal will help

There is already a SEBI initiated centralised payment platform available to investors to pay IAs and RAs, but RAs say that there can be lag in processing payments on it.

Research analysts (RAs) are having to factor in something else in their risk analysis, that of having their bank accounts frozen indefinitely. There have been cases of late where some clients have filed complaints with the cyber crime wings of the police, who then, based on limited information, take action that includes locking RAs out of their bank accounts.

"Clients unhappy with the returns generated from investing calls have started going and filing complaints with the cyber police, and the police do not understand that we are SEBI (Securities and Exchange Board of India)-registered analysts and our job is to give advice and not guarantee returns. Therefore, the police act on the complaint first and freeze our bank accounts," said an RA, on condition of anonymity. The RA added that he has had several such complaints come in from peers, about their bank accounts being frozen without giving them a chance to explain their situation.

"The police have told some of us that they don't know what SEBI is," he added.

The problem with this process is also that the complaint may be registered in a police station that is far away from the RA's location. Following up with the police in that jurisdiction then becomes all the more harder.

These RAs believe that what could come as a relief is the new payment mechanism proposed by the market regulator. On January 31, SEBI released a consultation paper titled "Safe and Efficient Transfers on UPI".

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Proposed payment mechanism

Under this, the regulator has proposed that market intermediaries such as RAs, investment advisors (IAs), mutual funds and brokers will be given special UPI addresses to collect their fees. This will ensure that the investors are paying genuine SEBI-registered intermediaries.

The paper said, "Over the years, many unregistered entities have misled investors by unauthorized collection of money, which is mostly siphoned-off for their personal gains. There is a need to proactively restrict their proliferation and thereby enable investors to identify SEBI registered market intermediaries and make requisite payments to them in a more legitimate, convenient, and efficient way."

A UPI or ID is typically made up of a username and a handle, separated by an “@” symbol.

Under the proposed mechanism, the username will be an alphanumeric ID that will be generated for the user while the handle used will be a unique identifier linked to the bank of the registered intermediaries.

The username will be readable, relatable and carry the segment in which the intermediary is operating, for example, abc.bkr for a broker and abc.mf for mutual funds. The paper also said that the UPI handle will combine @payright with the name of the intermediary's bank of choice. For example abc.bkr@payrighthdfc.

The RA said that when they had approached the market regulator with the concerns around bank accounts being frozen without adequate evidence, and their businesses being affected by it, SEBI officials had said that they will be able to help if the bank accounts come under the new system.

"Then they will be able to call up the police and explain to them that this comes under their supervision and unfreeze the accounts. Investors can then file their complaints through SEBI's redressal mechanism," said the RA.

Existing payment platform
There is already a SEBI-initiated centralised payment platform available to investors to pay IAs and RAs, which was launched in September 2024. Currently, the use of the platform, which was co-created by BSE Ltd, is optional, though the regulator has asked the supervisory body to encourage people to use this platform.

According to RAs, while this platform is helpful, there are other concerns when relying on it entirely.

"There can be a lag in payments when it is mediated through this platform. Investors may get impatient when their service starts with this lag, of two or even three days, and opt out of the RA's service. The RA cannot start the service before receiving the payment too," said the RA quoted above.