The Securities and Exchange Board of India (SEBI) has established a comprehensive framework to regulate research analysts, aiming to enhance transparency and protect investors. This article explores the key aspects of SEBI's guidelines, focusing on SEBI-registered research analysts, the National Institute of Securities Markets (NISM) certification, and the roles of equity and market research analysts.
SEBI-Registered Research Analysts
SEBI mandates that individuals and entities offering research services in the securities market must register as research analysts. This registration ensures adherence to professional standards and ethical practices. Recent amendments have introduced a tiered deposit system based on the number of clients, ranging from ₹1 lakh for up to 150 clients to ₹10 lakh for over 1,000 clients. Existing analysts must comply by April 30, 2025, while new applicants are required to meet these requirements immediately.
NISM Research Analyst Certification
The National Institute of Securities Markets (NISM) offers the "NISM-Series-XV: Research Analyst Certification Examination," a mandatory qualification for those seeking SEBI registration as research analysts. This certification aims to enhance the quality of services by ensuring analysts possess essential knowledge in areas such as securities markets, fundamental research, and company analysis. The examination comprises multiple-choice questions and case-based scenarios, with a passing score of 60%.
Equity Research Analysts
Equity research analysts specialize in evaluating publicly traded companies to provide investment recommendations. SEBI's guidelines require these professionals to maintain high standards of diligence, ensuring that their analyses are based on reliable information. Analysts must disclose any conflicts of interest and are prohibited from guaranteeing returns, thereby fostering trust and integrity in their reports.
Market Research Analysts
Market research analysts focus on broader market trends, offering insights that guide investment strategies. Under SEBI regulations, these analysts must adhere to strict compliance measures, including the maintenance of records supporting their research findings. They are also required to disclose the terms and conditions of their services to clients, ensuring transparency and informed decision-making.
Fee Structure and Client Segregation
SEBI has standardized the fee structure for research analysts, capping the maximum permissible fee at ₹1.51 lakh per annum per family. Fees can be charged in advance but must not exceed one quarter's fee at a time. Additionally, analysts are required to segregate their research services from other activities, such as investment advisory, to prevent conflicts of interest. This segregation ensures that clients receive unbiased and dedicated research services.
Compliance and Disclosure Requirements
To uphold transparency, SEBI mandates that research analysts disclose the most important terms and conditions (MITC) of their services to clients. This includes fee structures, potential conflicts of interest, and the scope of services provided. Analysts must inform existing clients of these terms by June 30, 2025, and ensure that new clients provide consent before services commence. These measures are designed to foster informed client engagement and trust in research services.
Conclusion
SEBI's guidelines for research analysts are structured to promote professionalism, transparency, and investor protection in the securities market. By adhering to these regulations, research analysts can enhance the quality of their services, thereby contributing to a more informed and secure investment environment.