SEBI Relaxes Rules for Boarding of Investment Advisors, Research Analysts

The Securities and Exchange Board of India (SEBI) acts as a vigilant protector of India’s financial markets, ensuring that transparency, fairness, and investor safeguarding are upheld. Founded in 1988 and endowed with statutory authority in 1992, SEBI forms the bedrock of market regulation in India. Through its forward-thinking strategies, SEBI has transformed the functioning of stock markets, building trust among millions of investors.

SEBI Reforms Regulations For Research Analysts

SEBI has implemented significant reforms concerning the regulations for investment advisors and research analysts (RAs), easing the prerequisites around minimum qualifications, experience, mandatory periodic examinations, and net worth criteria.

These alterations have been introduced at a time when the number of registered investment advisors (RIAs) has dwindled to under 1,000. The changes, which were sanctioned during the board meeting in September, have now been formally announced, amending the regulations that govern both RIAs and RAs.

Reduce Compliance Obligations

The alterations aim to lessen compliance obligations to attract a greater number of participants within the regulatory framework. The revised regulations also permit part-time investment advisors and research analysts to register. Additionally, trading recommendations have been excluded from the definition of “investment advice”.

The industry had requested a relaxation of the regulations following SEBI’s crackdown on financial influencers who lacked registration with the authority.

Simplified Guidelines by SEBI

SEBI has simplified the guidelines for investment and research advisors by lowering the qualifications to a graduate level and eliminating the prerequisites for previous experience. 

Although NISM-based certifications remain compulsory, the requirement for renewal examinations has been removed; a new certification must be acquired before the previous one expires.

Rules for Individual Investment Advisors 

Individual investment advisors who manage more than 300 clients or earn ₹3 crore in fees annually are now required to register as non-individual advisors, an increase from the previous limit of 150 clients, while part-time advisors are restricted to 75 clients. 

Registered Investment Advisors (RIAs) and Research Analysts (RAs) are required to disclose their use of AI tools, and research analysts must complete KYC procedures for clients who pay fees. It is now compulsory to segregate business at the group level, with restrictions placed on family members of RAs from offering distribution services to the same clientele.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.