SEBI Master Circular for Research Analysts

Shailja Singh

26 Jun, 2023

SEBI, the Securities and Exchange Board of India, has recently released a comprehensive and extensive master circular for Research Analysts on June 15, 2023. This circular is a significant step SEBI takes to ensure the market’s effective functioning and safeguard investors’ interests. As a part of its regulatory frameworks, SEBI regularly issues circulars and directives to research Analysts (RAs). Introducing the Master Circular for RAs aims to provide easy access to these circulars, simplifying the process for users.

The Master Circular serves as a compilation of the relevant circulars issued by SEBI concerning Research Analysts. It also supersedes any previous circulars that applied to Research Analysts. By consolidating these guidelines, SEBI aims to create a cohesive and up-to-date set of regulations for Research Analysts in India.

Critical Guidelines for Research Analysts:

The Master Circular includes several crucial guidelines for Research Analysts to ensure ethical conduct and prevent conflict of interest. Some of the critical guidelines covered in the Master Circular are as follows:

1. Conflict Of Interest: Research Analysts must disclose any potential or actual potential conflict of interest and implement appropriate measures to manage and mitigate these conflicts effectively. Research Analysts should refrain from trading securities while possessing material non-public information or engaging in activities that contribute to market manipulation.
2. Suitability of Information: Research Analysts must not be incentivized to sell products that do not align with the risk profile of their clients. This guideline ensures that Research Analysts prioritize the suitability of investment products for their client’s specific needs and circumstances.
3. Sharing Of Information: Research Analysts are strictly prohibited from sharing client information obtained through their professional dealings for personal gains and any unauthorized purpose. This guideline emphasizes the importance of maintaining client confidentiality and data privacy.

Reporting Requirements and Compliances:

The Master circular also outlines various reporting requirements that research Analysts must adhere to these requirements aim to enhance transparency and accountability within the industry. Some of the reporting obligations include:

1. Monthly Complaint Data: Research analysts must display complaint data on their website or mobile application monthly. This display should include details of pending and resolved complaints enabling investors to make informed decisions.
2. Compliance Undertaking: Research Analysts must submit an undertaking confirming the advisory of SaaS-based solutions¹. This ensures that the RAs adopt and follow the recommended practices and standards in their research activities.
3. Annual Compliance Audit: Research Analysts must conduct an annual audit of their compliance with Research Analyst regulations. This audit serves as a comprehensive assessment of their adherence to the prescribed guidelines and Checks their ethical conduct.

Investor Charter:

The investor chart outlines several do’s and Don’ts for investors to ensure they make informed decisions and safeguard their interests. Some of the key points covered in the Investor Charter are:

Do’s

1. Deal With SEBI Registered Research Analysts: Investors are advised to engage with RAs registered with SEBI, ensuring the analysts’ compliance with regulatory standards.
2. Verify Registration Details; Investors should verify the RA’s valid registration certificate and SEBI registration number to confirm their legitimacy.
3. Pay Attention To Disclosures: Investors should carefully review the disclosures in research reports before making investment decisions.
4. Payment Channels: Investors are advised to pay RAs through authorized baking channels and obtain duly signed receipts detailing payment transactions.
5. Research Recommendations: before purchasing securities or participating in a public offer, investors should refer to the research recommendations provided by their Research Analysts make informed investment choices.
6. Seek Clarifications: Investors should proactively ask relevant questions and seek classification from their Research analyst to ensure a clear understanding of the investment recommendations before taking action.
7. Reporting Suspicion Activities: Investors are encouraged to report RAs who offer assured or guaranteed returns to SEBI, as such practices are often associated with fraudulent activities.

Don’ts

1. Providing Funds For Investment: Investors should refrain from providing funds directly to research analysts for investment purposes; such arrangements can be potentially risky and may lead to fraudulent activities.
2. Falling For False Advertisements Or Market Rumors: Investors should not fall prey to enticing advertisements or market rumors, as they often lack credibility and may mislead investors.
3. Limited Period Discounts and Incentives: Investors should exercise caution when considering limited period discounts or other incentives offered by RAs. Such offers may be used as a means to manipulate investors’ decisions.
4. Sharing Login Credentials: Investors must keep their login credentials and passwords of their trading and demat accounts private from Rese3arch Analysts. Protecting personal account information is crucial for maintaining the security of investments.

Conclusion

The SEBI Master Circular for Research Analysts serves as a comprehensive references guide, consolidating all relevant circulars to provide a single access point for researchers and industry professionals. By issuing this Master Circular, SEBI aims to streamline regulations, enhance transparency and protect the interest of the investors in the Indian securities market. Research Analysts should diligently review the circular and ensure strict compliance with the outlined guidelines to uphold ethical standards and foster investor confidence in the market.

FAQs

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1. https://en.wikipedia.org/wiki/Software_as_a_service