Research analysts to be registered, rules SEBI
In order to protect investors from any motivated research reports, India's market regulator SEBI has brought under its control the research analyst community.
The Securities and Exchange Board of India (Research Analysts) Regulations, 2014 prescribes not only the educational qualifications for an individual analyst but also the minimum net worth. The registration certificate is valid for five years.
As per the regulations which will come into force from the 19th day of its notification in the official gazette, no person shall act as a research analyst or research entity unless a certificate of registration from SEBI has been obtained under these regulations.
However, those who are acting as research analysts or research entities before the commencement of these regulations may continue to do so for a period of six months from such commencement or, if they have made an application for a certificate of registration within the said period of six months, till the disposal of such application.
As per the regulations, any person located outside India engaged in issuance of research report/analysis in respect of securities listed or proposed to be listed shall enter into an agreement with a registered research analyst or research entity.
The educational qualifications prescribed for a registered research analyst are: a professional qualification or post-graduate degree or post graduate diploma in finance, accountancy, business management, commerce, economics, capital market, financial services or markets.
In the case of a graduate, then he/she should have an experience of at least five years in activities relating to financial products or markets or securities or fund or asset or portfolio management.
According to the regulations, a research analyst who is an individual or partnership firm shall have net tangible assets of value not less than Rs.100,000.
A research analyst who is body corporate or limited liability partnership firm shall have a networth of not less than Rs.25,00,000.
All existing research analysts shall comply with the capital adequacy requirement within one year from the date of commencement of these regulations.
Personal trading activities of the individuals employed as research analyst by research entity shall be monitored, recorded and whereever necessary, shall be subject to a formal approval process.
The regulations stipulate that research entity shall not pay any bonus, salary or other form of compensation to any individual employed as research analyst that is determined or based on any specific merchant banking or investment banking or brokerage services transaction.
However an investment adviser, credit rating agency, asset management company or fund manager need not seek registration under this regulations.
(Posted on 03-09-2014)