Securities and Exchange Board of India (Research Analysts) (Third Amendment) Regulations, 2024. - SEBI/LAD-NRO/GN/2024/220 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 16th December, 2024 SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) (THIRD AMENDMENT) REGULATIONS, 2024 No. SEBI/LAD-NRO/GN/2024/220 In exercise of the powers conferred by sub-section (1) of section 30 read with clause (b) of sub-section (2) of section 11 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) , the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 , namely: 1. These regulations may be called the Securities and Exchange Board of India (Research Analysts) (Third Amendment) Regulations, 2024. 2. They shall come into force on the date of their publication in the Official Gazette. 3. In the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 I. in regulation 2 , in sub-regulation (1), (1) after clause (f) and before clause (g), the following clauses shall be inserted, namely: - (fa) consideration means any form of economic benefit including non-cash benefit, received or receivable, directly or indirectly, in any form whether from client or otherwise for providing research services; (fb) family of an individual research analyst shall include individual research analyst, spouse, children and parents; (fc) family of client shall include individual client, dependent spouse, dependent children and dependent parents; (2) after clause (n) and before clause (o), the following clauses shall be inserted, namely: - (na) non-individual means a body corporate including a limited liability partnership and a partnership firm; (nb) other business activity or employment means such business activity or employment which is not related to securities and: a. it does not involve handling or managing of money or funds of client or person; or b. it is not related to providing advice or recommendation to any client or person in respect of any products or assets for investment purposes; (nc) partner means partner of the partnership firm or a limited liability partnership who renders research services on behalf of the firm or limited liability partnership; (nd) part-time research analyst means an individual or a partnership firm who for consideration, is engaged in the business of providing research services and is also engaged in any other business activity or employment; (ne) persons associated with research services shall mean any member, partner, officer, director or employee or any other staff of such research analyst or research entity including any person occupying a similar status or performing a similar function irrespective of the nature of association with the research analyst or research entity who is engaged in providing research services to the clients or other persons or group of persons or general public. Explanation . - All client and public facing persons such as analysts, sales staff, service relationship managers, client relationship managers, etc., by whatever name called, shall be deemed to be persons associated with research services, but shall not include persons who discharge clerical or office administrative functions where there is no connection with research services and they have no client contact; (3) after clause (o) and before clause (p), the following clause shall be inserted, namely: - (oa) principal officer in case of non-individual research analyst engaged (i) solely in providing research services, shall mean the managing director or designated director or managing partner or executive chairman of the board or equivalent management body who is responsible for the overall function of the business and operations of non-individual research analyst; (ii) in activities other than research services through separate departments/divisions, may be the person at the management level who is a business head or unit head, responsible for the overall function of the business and operations related to research services: Provided that in case of non-individual research analyst being a partnership firm one of the partners shall be designated as its principal officer: Provided further that where no partner of firm registered as a research analyst has minimum qualification and certification requirements provided in these regulations, it shall apply for registration as a research analyst in the form of a limited liability partnership or a body corporate within such time as may be specified by the Board. Explanation. The provisions of sub clause (i) shall also be applicable to the principal officer of a non-individual entity registered both as a research analyst and an investment adviser but engaged in no other business activity. (4) in clause (t), after the words independent research analyst and before the words or individual research analyst , the words and symbol or part-time research analyst , shall be inserted. (5) clause (u) shall be substituted with the following: (u) research analyst means a person who, for consideration, is engaged in the business of providing research services and includes a part-time research analyst; (6) after clause (w) and before clause (x), the following clause shall be inserted, namely: - (wa) research services means the following services provided by research analyst: i. preparation or publication of the research report or content of the research report; or ii. providing or issuing research report or research analysis; or iii. making 'buy/sell/hold' recommendation; or iv. giving price target or stop loss target; or v. offering an opinion concerning public offer, or vi. recommending model portfolio; or vii. providing trading calls; or viii. any other service of similar nature or character, with respect to securities that are listed or proposed to be listed in a stock exchange, whether or not any such person has the job title of 'research analyst' to the clients or other persons or group of persons or general public; (7) in clause (zb), the symbol . shall be substituted with the symbol ; . (8) after clause (zb), the following clause shall be inserted, namely: - (zc) trading calls means intraday, ultra-short duration, non-delivery based (other than hedging) recommendation or any recommendation related to securities that are not personalized or investor specific. II. in regulation 3 , sub-regulation (1), (1) in second proviso, the symbol . shall be substituted with the symbol : . (2) after the second proviso, the following proviso shall be inserted, namely: - Provided further that any principal officer, person associated with research services and partner of a research analyst which is registered under these regulations shall not be required to seek registration under regulation 3, subject to compliance with regulation 7 of these regulations. III. in regulation 6 , (1) in clause (i), after the words body corporate or and before the words limited liability partnership , the words partnership firm or shall be inserted; (2) clause (ii) shall be substituted with the following, namely: - (ii) whether in case the applicant is an individual, he and all persons associated with research services are appropriately qualified and certified as specified in regulation 7; (3) clause (iii) shall be substituted with the following, namely: - (iii) whether in case the applicant is a body corporate, the principal officer, individuals employed as research analyst and all persons associated with research services are appropriately qualified and certified as specified in regulation 7; (4) clause (iv) shall be substituted with the following, namely: - (iv) whether in case the applicant is a partnership firm or a limited liability partnership, the principal officer, partners engaged in issuance of research report or research analysis and all person associated with research services are appropriately qualified and certified as specified in regulation 7; (5) in clause (v), after the words as research analyst and before the words are qualified , the words and all persons associated with research services shall be inserted; (6) in clause (vi), the words capital adequacy shall be substituted with the word deposit ; (7) in clause (vii), after the words research analyst and before the words and partners of the applicant , the words and symbol , persons associated with research services shall be inserted. IV. regulation 7 shall be substituted with the following, namely: - Qualification and certification requirement. 7. (1) An individual research analyst or a principal officer of a non-individual research analyst registered under these regulations, individuals employed as research analyst and partners of a research analyst, if any, engaged in research services shall have the following minimum qualifications, at all times: (i) A professional qualification or graduate degree or post-graduate degree or post graduate diploma in finance, accountancy, business management, commerce, economics, capital market, banking, insurance, actuarial science or other financial services from a university or institution recognized by the Central Government or any State Government or a recognised foreign university or institution or association; or (ii) a professional qualification by completing a Post Graduate Program in the Securities Market (Research Analysis) from NISM of a duration not less than one year or a professional qualification by obtaining a CFA Charter from the CFA Institute; (2) Persons associated with research services shall, at all times, have minimum qualification of a graduate degree in any discipline from a university or institution recognized by the Central Government or any State Government or a recognized foreign university or institution. (3) An individual registered as research analyst under these regulations, a principal officer of a nonindividual research analyst, individuals employed as research analyst, person associated with research services and in case of the research analyst being a partnership firm, the partners thereof if any, who are engaged in providing research services, shall have, at all times, a NISM certification as specified by the Board from time to time: Provided that a fresh relevant NISM certification as specified by the Board from time to time shall be obtained before expiry of the validity of the existing certification to ensure continuity in compliance with certification requirements. V. regulation 8 shall be substituted with the following, namely: - Deposit. 8. (1) A research analyst shall maintain a deposit of such sum as specified by the Board from time to time. (2) The deposit shall be maintained with a scheduled bank, marked as lien in favour of a body or body corporate recognised by the Board for the purpose of administration and supervision of research analysts in accordance with regulation 14 of these regulations: Provided that such deposit shall be available for utilization in case the research analyst fails to pay dues emanating out of arbitration and conciliation proceedings, if any, under the Online Dispute Resolution Mechanism or such other mechanism as may be specified by the Board. VI. in regulation 9 , (1) after the words Form B and before the words under First Schedule , the words and symbols to a research analyst or in Form C to a part-time research analyst, as the case may be shall be inserted; (2) the symbol . shall be substituted with the symbol : ; (3) the following proviso shall be inserted, namely: - Provided that an individual or partnership firm registered as an investment adviser may also be granted certificate of registration as a research analyst, subject to such terms and conditions as the Board may deem fit and appropriate. VII. in regulation 13 , (1) in clause (iii), (a) the symbol . shall be substituted with the symbol : ; (b) the following proviso shall be inserted, namely: - Provided that part-time research analyst registered under these regulations shall use the term part-time research analyst in all correspondences with its clients. (2) after clause (iii), the following clause shall be inserted, namely: - (iv) the number of clients of a part-time research analyst shall not exceed seventy-five in total at any point of time. VIII. in regulation 14 , after sub-regulation (1) and before sub-regulation (2), the following sub-regulation shall be inserted namely: (1A) Notwithstanding anything contained in regulation 14, the administration and supervision of the proxy advisers shall entirely vest with the Board. IX. in regulation 16 , (1) in sub-regulation (2), after the words and symbol Independent research analysts, and before the words individuals employed , the words and symbols part-time research analysts, shall be inserted; (2) in clause (3), after the words and symbol Independent research analysts, and before the words individuals employed , the words and symbols part-time research analysts, shall be inserted; (3) in clause (4), after the words and symbol Independent research analysts, and before the words individuals employed , the words and symbols part-time research analysts, shall be inserted. X. in regulation 19 , after clause (vi), the following clause shall be inserted, namely: - (vii) A research analyst or research entity shall disclose to the client the extent of use of Artificial Intelligence tools in providing research services. XI. after regulation 19 and before regulation 20, the following regulation shall be inserted, namely: - Website. 19A. A Research analyst or research entity shall maintain a functional website containing such details as may be specified by the Board. XII. in regulation 20 , after sub-regulation (3), the following sub-regulation, shall be inserted, namely: - (4) Research analyst or research entity shall ensure that the recommendations in the research report are corroborated by relevant data and analysis forming the basis for such research service. XIII. in regulation 24 , (1) after sub-regulation (5), the following sub-regulations shall be inserted namely: - (6) A research analyst or research entity shall disclose to the client the terms and conditions as may be specified by the Board and take consent of the client on such terms and conditions in such manner as may be specified by the Board. (7) A research analyst or research entity who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality and integrity of the client data, use of any other information or data for research services, research services based on output of Artificial Intelligence tools and compliance with any law for the time being in force. (8) Research analyst or research entity engaged in providing model portfolio shall abide by the guidelines issued by the Board from time to time. XIV. in regulation 25 , (1) in sub-regulation (1), after clause (iv), the following clauses shall be inserted, namely: - (v) Know Your Client records of the fee paying client; (vi) a register or record containing list of the clients along with client s PAN, the date and nature of the research service, details of the products/securities for which research service was provided and fee/consideration, if any charged/received for such research service; (vii) records of communication including emails, call recordings etc. with all clients including prospective clients in such manner as may be specified; (viii) the terms and conditions of research services disclosed to the clients and the consent of the client thereon. (2) in sub-regulation (3), after the words Institute of Company Secretaries of India and before the symbol . , the words or Institute of Cost Accountants of India and submit the report of the same in such manner as may be specified by the Board shall be inserted. XV. regulation 26 shall be substituted with the following, namely: - Appointment of compliance officer. 26. (1) A non-individual research analyst or research entity shall appoint either: (i) a compliance officer; or (ii) an independent professional who is a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or member of any other professional body as may be specified by the Board, provided that such a professional holds a relevant certification from NISM, as specified by the Board who shall be responsible for monitoring the compliance of the provisions of the Act, these regulations and circulars issued by the Board. (2) Where independent professional referred in sub-regulation (1) of this regulation is appointed for monitoring compliance, the principal officer shall submit an undertaking to the Board or the body or body corporate recognised under regulation 14 of these regulations to the effect that 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. XVI. after regulation 26B and before regulation 27 , the following regulation shall be inserted, namely: - Client level segregation of research services and distribution activities. 26C. (1) An individual research analyst shall not provide distribution services. (2) The family of an individual research analyst shall not provide distribution services to the client to whom research services are being rendered by the individual research analyst and no individual research analyst shall render research services to a client who is receiving distribution services from other family members. (3) A non-individual research analyst or research entity shall have client level segregation at group level for research services and distribution services. Explanation. (i) The same client cannot be offered both research and distribution services within the group of the non-individual entity. (ii) A client can either be receiving research services where no distributor consideration is received at the group level or distribution services where no research services fee is collected from the client at the group level. (iii) Group for this purpose shall mean an entity which is a holding, subsidiary, associate, subsidiary of a holding company to which it is also a subsidiary, an investing company or the venturer of the company as per the provisions of Companies Act, 2013 for nonindividual research analyst or research entity which is a company under the said Act and in any other case, an entity which has a controlling interest or is subject to the controlling interest of a non-individual research analyst. (4) Non-individual research analyst or research entity shall maintain an arm s length relationship between its activities as research analyst and distributor by providing research services through a separately identifiable department or division. (5) Compliance and monitoring process for client segregation at group or family level shall be in accordance with the guidelines specified by the Board. XVII. in regulation 29 , (1) in sub-regulation (1), the words their representatives shall be substituted with the words and symbols partners, directors, principal officer and persons associated with research services ; (2) in sub-regulation (3), after the words and symbol director, partner and before the words or person responsible for , the words and symbol , principal officer and person associated with research services shall be inserted. XVIII. in regulation 31 , (1) the words requiring research analyst or research entity not to provide research recommendation for a particular period , appearing after the words or the investors including shall be omitted; (2) the existing clause (i) and (ii) shall be renumbered as (ii) and (iii), respectively; (3) the following clause shall be inserted as clause (i), requiring research analyst or research entity including partners, directors, principal officer and persons associated with research services, not to provide research recommendation for a particular period; (4) in clause (ii), after the words research analyst or research entity and before the words from operating in the capital market , the words and symbols including partners, directors, principal officer and persons associated with research services, shall be inserted. XIX. in First Schedule, (1) in Form A, (a) in item (1), after clause (e) and before clause (f), the following clauses shall be inserted, namely: - (ea) Indicate whether the application for the grant of certificate of registration is for part-time research analyst. (eb) Whether the applicant is engaged in any other business activity or employment? If so, details of such other business activity or employment. (b) in item (2), i. clause (c) shall be substituted with the following, namely: - (c) Whether the applicant or principal officer or person associated with research services employed by the applicant or partner of the applicant who renders research services has/have necessary qualification as specified in regulation 7. ii. clause (d) shall be substituted with the following, namely: - (d) Number of persons associated with research services employed by the applicant who shall engage in research analysis and/or research report preparation under these regulations on behalf of the applicant. (Provide details thereof, including self certified copies of supporting documents in respect of qualification for such persons associated with research services employed). iii. clause (e) shall be substituted with the following, namely: - (e) Declaration by the applicant that the principal officer, persons associated with research services employed and partner who renders research services, of the applicant, if any, currently comply with the qualification requirements under regulation 7. iv. clause (f) shall be substituted with the following, namely: - (f) Declaration by the applicant that it shall ensure that the principal officer, persons associated with research services employed and partner who renders research services, of the applicant, if any, comply with the certification and qualification requirements under the regulation 7 at all times including obtaining fresh certification before expiry of existing certification. v. after clause (f) and before clause (g), the following clause shall be inserted, namely: - (fa) Where the applicant is employed and has applied for registration as a part-time research analyst, the applicant shall enclose a no objection certificate from the employer. In case of change in employment, the applicant shall provide no objection certificate from the new employer. vi. clause (h) shall be substituted with the following, namely: - (h) Networth details or certified copy of assets and liabilities statement. (c) in item (5), after clause (f) and before clause (g), the following clause shall be inserted, namely: - (fa) In case of registration as part-time research analyst, a declaration that it shall maintain arms-length relationship between its business activity as research analyst and other business activity and shall ensure that its business activities as research analyst are clearly segregated from its other business activity or employment. (d) Item 6 shall be renumbered as item 7. (e) After item 5, the following item shall be inserted: - 6. SEGREGATION OF RESEARCH SERVICES AND DISTRIBUTION SERVICE (a) Provide a declaration that no consideration including any commission or referral fees whether embedded or indirect or otherwise by whatever name called shall be received directly or indirectly at Research Analyst s group or family level for the said service, as the case maybe. (b) If the applicant is a non-individual, whether the applicant proposes to offer distribution services. (2) after Form B, the following Form C shall be inserted, namely: - FORM C Securities and Exchange Board of India (Research Analysts) Regulations, 2014 [See regulation 9] Certificate of registration as Part-Time Research Analyst I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), read with the regulations made there under, the Board hereby grants a certificate of registration to _________________as a part-time research analyst subject to the conditions specified in the Act and in the regulations made thereunder. II. The Registration Number of the part-time research analyst is IN/RA/_____________. III. This certificate of registration shall be valid till it is suspended or cancelled by the Board Date: Place: MUMBAI By Order Sd/- For and on behalf of Securities and Exchange Board of India PRAMOD RAO, Executive Director [ADVT.-III/4/Exty./763/2024-25] Footnotes: 1. The Securities and Exchange Board of India (Research Analysts) Regulations, 2014 , were published in the Gazette of India on September 01, 2014 vide No. SEBI/LAD-NRO/GN/2014-15/07/1414. 2. The Securities and Exchange Board of India (Research Analysts) Regulations, 2014 were subsequently amended on, a. 8th December, 2016 by the Securities and Exchange Board of India (Change in Conditions of Registration of Certain) (Amendment) Regulations, 2016 vide notification No. SEBI/LADNRO/GN/2016-17/023. b. 17th April, 2020 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020 vide notification No. SEBI/LAD-NRO/GN/2020/10. c. 16th March, 2021 by the Securities and Exchange Board of India (Research Analysts) (Amendment) Regulations, 2021 vide notification No. SEBI/LAD-NRO/GN/2021/09. d. 3rd August, 2021 by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021 vide notification No. SEBI/LAD-NRO/GN/2021/30. e. 17th January 2023, by the Securities and Exchange Board of India (Change in Control in Intermediaries) (Amendment) Regulations, 2023 vide notification No. SEBI/LADNRO/GN/2023/115. f. 7th February, 2023 by the Securities and Exchange Board of India (Payment of Fees and Mode of Payment) (Amendment) Regulations, 2023 vide notification No. SEBI/LADNRO/ GN/2023/121. g. 3rd July 2023 by the Securities and Exchange Board of India (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023 vide notification No. SEBI/LAD NRO/GN/2023/137. h. 17th August 2023 by the Securities and Exchange Board of India (Facilitation of Grievance Redressal Mechanism) (Amendment) Regulations, 2023 vide notification No. SEBI/LADNRO/GN/2023/146. i. 26th April 2024 by the Securities and Exchange Board of India (Research Analysts) (Amendment) Regulations, 2024 vide notification No. SEBI/LAD-NRO/GN/2024/170. j. 19th August, 2024 by the Securities and Exchange Board of India (Research Analysts) (Second Amendment) Regulations, 2024 vide notification No. SEBI/LAD-NRO/GN/2024/199