SEBI Proposes Easing Norms for Research Analysts and Investment Advisors

In a bid to regulate the burgeoning finfluencer landscape, the Securities and Exchange Board of India (SEBI) has unveiled a consultation paper proposing significant relaxations in the Research Analyst (RA) and Investment Advisor (IA) Regulations. This move comes on the heels of concerns over the increasing number of unregistered financial influencers operating as advisors.

SEBI’s Whole-Time Member, Kamlesh Varshney, recently outlined a seven-point strategy to address this issue, with one key component being the simplification of registration norms for RAs and IAs. The regulator believes that by easing entry barriers, more individuals and entities will be incentivised to seek formal registration, thereby enhancing regulatory oversight.

The consultation paper outlines a series of proposed changes, including lowering the minimum educational qualification from post-graduation to graduation, eliminating experience requirements, and waiving the mandatory net worth for IAs and RAs. Additionally, SEBI is considering allowing entities to register as both IAs and RAs and introducing provisions for part-time registration.

To address the growing influence of trading calls, the paper proposes a framework to differentiate between IAs and RAs in this context. Trading calls provided on a one-to-one basis after conducting risk profiling and product suitability assessments will fall under IA regulations. Conversely, those disseminated without such assessments on a one-to-many basis will be governed by RA regulations.

The regulator has also sought public feedback on establishing guidelines for client-level segregation of research and distribution services by RAs and for recommending model portfolios.

Stakeholders have until August 26 to submit their comments on the proposed changes.

By streamlining the registration process and clarifying the regulatory landscape for trading calls, SEBI aims to foster a more regulated and transparent investment advisory ecosystem.

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.