SEBI (Research Analyst) Regulations, 2014

SEBI (Research Analyst) Regulations, 2014 (Part 1)

Definition of Research Analyst: A person who, for consideration, is engaged in the business of providing research services, including part-time research analysts.
Research Services: Includes preparation or publication of research reports, providing or issuing research reports or analysis, making 'buy/sell/hold' recommendations, and more.
Registration Requirement: Research analysts are required to be registered with SEBI.

Key Concept 1: Management of Conflict of Interest and Disclosure Requirements

Internal Policies and Procedures: Research analysts or entities must have written internal policies and control procedures to address conflicts of interest and promote objective research.
Independence of Research Activities: Mechanisms must be in place to ensure the independence of research activities from other business activities.
Disclosure Requirements: Research analysts or entities must disclose certain information, including ownership and material conflict of interest, in research reports and public appearances.

Key Concept 2: General Responsibility

Arms-Length Relationship: Research analysts or entities must maintain an arms-length relationship between their research activity and other activities.
Code of Conduct: Research analysts or entities must abide by the Code of Conduct.
Change in Control: Prior approval from SEBI is required in case of a change in control of the research analyst or entity.
Compliance with Regulations: Research analysts or entities must comply with the certification and qualification requirements and furnish SEBI with information and reports as specified.

Key Concept 3: Maintenance of Records

Records to be Maintained: Research analysts or entities must maintain records, including research reports, research recommendations, and Know Your Client records.
Retention Period: Records must be preserved for a minimum period of five years.
Annual Audit: An annual audit must be conducted to ensure compliance with the regulations.
Compliance Officer: A compliance officer must be appointed to monitor compliance with the provisions of the Act, regulations, and circulars issued by SEBI.

SEBI (Research Analyst) Regulations, 2014 (Part 2)

Independent Professional: An independent professional who is a member of the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India, or the Institute of Cost Accountants of India, or a member of any other professional body as may be specified by the SEBI, provided that such a professional holds a relevant certification from NISM, as specified by the Board.
Compliance Officer: A non-individual research analyst or research entity shall appoint either a compliance officer or an independent professional who meets the specified criteria, to monitor the compliance of the provisions of the Act, these regulations, and circulars issued by the Board.
Role of Compliance Officer: The compliance officer or independent professional shall be responsible for monitoring the compliance of the provisions of the Act, these regulations, and circulars issued by the Board.
Undertaking by Principal Officer: Where an independent professional is appointed for monitoring compliance, the principal officer shall submit an undertaking to the Board or the body or body corporate recognized under regulation 14 of these regulations, to the effect that the principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by the Board.
Dispute Resolution: Regulations 26A, 26B, and 26C describe the dispute resolution pertaining to research analyst or research entity and its client, redressal of investor grievances, and client-level segregation of research services and distribution activities, respectively.
Past Performance Data: SEBI has enabled Research Analysts (RAs) to share past performance data with clients for the period prior to the operationalization of PaRRVA.
Case Study: The case of SEBI v/s Anirudh Sethi highlights the importance of registration and compliance with SEBI (RA) Regulations. The case involved Anirudh Sethi providing investment advice and research analyst services without registration, leading to a violation of SEBI (PFUTP) Regulations.
Review Questions: The review questions cover topics such as:
- Who is primarily responsible for making buy/sell recommendations?
- The minimum period for maintaining research reports/research recommendations.
- The type of records to be maintained by the Research Analyst or Research Entity.
- The frequency of audits required for Research Analysts in compliance with SEBI Regulations.