SEBI releases framework for supervision of research analysts, investment advisers

The circular will become effective on July 25, 2024.

The capital markets regulator Securities and Exchange Board of India (SEBI) has announced the framework for administration and supervision of research analysts (RAs) and investment advisers (IAs) by the proposed new supervisory bodies.

SEBI on April 26 notified that a recognised stock exchange may undertake the activities of administration and supervision over specified intermediaries. Accordingly, stock exchanges can now be recognised as Research Analyst Administration and Supervisory Body (RAASB) and Investment Adviser Administration and Supervisory Body (IAASB) for administration and supervision of RAs and IAs, respectively.

“The core functions relating to registration, enforcement action and disciplinary or penal action shall remain with SEBI and SEBI shall continue to register IAs and RAs as per the mandate given under the Securities and Exchange Board of India Act, 1992,” SEBI said in a circular dated May 2.

Criteria for grant of recognition as RAASB and IAASB

For recognition of as RAASB and IAASB, an entity must have minimum 15 years of existence as a recognised stock exchange. Further, the stock exchange must have a Minimum net worth of Rs 200 crore and have nation-wide terminals.

The stock exchange need to have a capacity for investor service management gauged through reach of at least Investor Service Centers (ISCs) in at least 20 cities.

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“The stock exchange recognised as RAASB/IAASB shall maintain necessary infrastructure like adequate office space, equipment and manpower to effectively discharge the responsibilities of RAASB/ IAASB. Infrastructure may be shared with other group entities where required,” SEBI said.

Responsibilities of SEBI and RAASB/ IAASB

In terms of administration, the proposed RAASBs and IAASBs will share responsibilities with the SEBI.

For example, RAASBs and IAASBs will undertake, initial scrutiny of registration applications to ensure completeness of submission of information/ documents along with recommendations on the applications to SEBI.

Proposed RAASBs/IAASBs will also be under administrative responsibilities such as approval of advertisements of RAs/IAs as per Advertisement Code issued by SEBI, maintenance of a database of RAs/IAs and issuance of circulars, instructions or standard operating procedures, etc. to RAs/IAs for implementation of provisions of SEBI regulations or circulars.

The RAASBs/IAASBs will also need to submit periodical reports to SEBI and collect fees.

As to supervision, RAASBs/IAASBs will monitor the activities of RAs/IAs by obtaining Annual Compliance Audit Report and other periodic/ad-hoc reports covering general details of RAs/IAs, details of customer complaints, details of clients, etc.

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As per the regulator, existing RAs registered with SEBI will be deemed to be enlisted with RAASBs and existing IAs registered with SEBI, who are also members of BASL, shall be deemed to be enlisted with the IAASB recognised under this framework.

BSE Administration & Supervision Limited (‘BASL’), a wholly-owned subsidiary of BSE Limited, was granted recognition as IAASB for three years from June 1, 2021.

The circular will become effective on July 25, 2024.