The Securities and Exchange Board of India (‘SEBI’) introduced the SEBI (Research Analysts) Regulations, 2014 (‘RA Regulations’) with the objective of promoting investor interest, and enhancing transparency and accountability of investment advisors.
The RA Regulations primarily introduced mandatory registration requirement of ‘research analysts’ with SEBI, qualification thresholds, norms for maintenance of records and codes of conduct with the objective of protecting the investors and maintaining the integrity of the securities market.
In the recent past, however, new risks have been identified owing to global dissemination of research reports leading to the introduction of SEBI (Research Analysts) (Third Amendment) Regulations, 2024 (‘2024 Amendment’).
The 2024 Amendment inter alia introduced wider criterion for qualification of analysts, deposit requirements, stringent record keeping norms, client segregation requirements and mandatory disclosures, including disclosure of use of Artificial Intelligence (AI) in reports and analysis. Pursuant to these amendments, SEBI also issued Circular no. SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2025/004 dated 8 January 2025, on guidelines for research analysts.
However, the amendments as introduced vide the 2024 Amendment have led to operational challenges and practical issues due to ambiguous provisions and compliance requirements, which led to several representations made by analysts in this regard.
Clarification provided under the FAQs
In pursuance of such representations, SEBI has issued FAQs related to regulatory provisions for research analysts vide Circular No. SEBI/HO/MIRSD/ MIRSD-PoD/P/CIR/2025/105 on 23 July 2025, providing clarifications sought by research analysts, the key points of which are discussed hereunder:
a. Types of securities
All instruments classified as ‘securities’ under Securities Contracts (Regulation) Act, 1956 are covered within the purview of the RA Regulations. The RA Regulations are not restricted to merely equity and equity linked securities.
b. Scope of research analysts and registration requirements
* Employees of research analyst: SEBI has clarified that the registration requirements under the RA Regulations only apply to entities engaged in the research activities. Individuals who are employees of such entities are not required to register; however, they must comply with the necessary qualifications and certifications as specified in the regulations. The research entities who employ individuals must track and record personal trading activities of their individual employees.
* Support services: People involved in the clerical activities, marketing and support services with respect to the publication and distribution of the reports shall not be included in the definition of ‘research analysts’.
* Personnel not having direct client contact and activities not connected with the research services shall not to be considered as being ‘associated’ with the service of research as contemplated in the definition.
* However, any person qualifying as a research analyst or a research entity or holding itself out as an analyst must obtain a certification of registration from SEBI. Accordingly, this entails that any person issuing research reports, analysis or otherwise providing research services must register with SEBI, unless specifically exempted.
* Exempt list: In this regard, SEBI has also provided a list of persons and entities exempted from registration including investment advisers, fund managers, asset management companies (AMC) and credit rating agencies (CRA). However, they must comply with the requirements under Chapter III of the RA Regulations, i.e., disclosure requirements and management of conflict of interest, in the event they issue, circulate or distribute research reports to the public, or their employees make any public statements in this regard.
* SEBI registered brokers, merchant bankers, intermediaries: Additionally, even SEBI registered brokers, merchant bankers and intermediaries must obtain a separate registration under the RA Regulations if they are engaged in research analysis and publishing reports.
c. Validity of registration
Subject to payment of fees every 5 years, the registration certificate under the RA Regulations stands perpetually valid, unless it is suspended or cancelled.
d. Proxy Advisers
The requirement of registration extends to proxy advisers under the RA Regulations. Additionally, proxy advisers must disclose (a) the extent and scope of research involved in a particular recommendation; (b) effectiveness and procedure to ensure accuracy of data; (c) interaction policies and procedures; and (d) maintenance of records of voting recommendations.
e. Independent Research Analysts
The FAQs define an ‘Independent Research Analyst’ as a person only engaged in research analysis and publications of research reports and includes those providing research services and are not employed or engaged with any intermediary other than a SEBI registered entity for research.
Sole proprietors can register as independent research analysts subject to the eligibility conditions provided under the RA Regulations.
f. Appointment of compliance officer
Research entities and non-individual analysts must appoint compliance officers to monitor compliance requirements under the RA Regulations and circulars issued by SEBI from time to time, who may be a member of a professional body subject to relevant certification by NISM as specified by SEBI. Further, it is permissible to appoint a compliance officer who is an existing officer of an intermediary such as a brokerage firm or merchant banking firm.
g. Disclosures for public appearance
As clarified by SEBI, ‘public media’ includes any platform inter alia including radio, TV, internet, print and web media that is accessible to the general public.
Research analysts, including their employees and directors, must disclose their status of registration and financial interests during any public appearance. They must also comply with RA Regulations 16 and 17, i.e., limitations on trading and compensation while offering an opinion concerning securities or public offers, responding to queries in this regard and communicating a report through public media in their personal capacity.
However, journalists do not fall within the scope of the RA Regulations and are not required to register with SEBI as long as they are employed with media agencies. Any recommendations made by a journalist on securities and public offers shall be based on reports by SEBI registered analysts or other intermediaries permitted to issue such research reports and must include the mandatory disclosures including disclosure of name, registration status and financial interests as stipulated under Regulation 16.
h. Exclusions from non-research communications
To remove the ambiguity of what may constitute as a ‘research report’, SEBI has merely reiterated, as provided in Regulation 2(w), that general communications inter alia including commentaries, discussions on general trends, market conditions, statistical summaries and broad-based indices will not be covered within the scope of a research report under the RA Regulations.
i. Exemption of technical analysis as a methodology
While technical analysis on the demand and supply sectors or indices is exempt from the purview of the RA Regulations, research services on securities regulated by SEBI based on any methodology, including by way of technical analysis is not exempt.
j. Foreign Analysts
Foreign Analysts may issue research reports and analysis on securities listed in India, subject to an agreement with a SEBI registered analyst or entity under the RA Regulations.
k. Clarification of trading restrictions under Regulation 16
Independent analysts, including part-time analysts, employees and associates, shall not:
1. Trade in recommended or followed securities 30 days prior to and 5 days after research report publication;
2. Trade or deal in securities (directly or indirectly) in contravention to the recommendation provided;
3. Procure securities of issuer prior to the IPO if the issuer is engaged in a business that the analysts follows.
l. Client level segregation
To prevent conflict of interest and ensure that research analysts provide independent research, Regulation 26C provides for client level segregation of research services and distribution activities. Research analysts and entities cannot render research services for the same securities on which they provide distribution services. Distribution services can only be provided through a separate unit or a separate entity on arm’s length basis.
In this regard, SEBI has clarified by way of illustrations that the aforesaid client level segregation is mandatory, except if (a) distribution services provided are of mutual funds / AIF / PMS schemes and research service is for stocks; (b) distribution services of other products not under the purview of SEBI to client at group/ family level; (c) for research and distribution of mutual funds.
Exemption for institutional clients: Under the present regime, compliance exemption with client level segregation of research and distribution services is applicable only in case of exclusive research services to institutional clients by signing a standard waiver for the same. In light of ease of doing business and owing to the skill, knowledge and nature of institutional clients, it has been clarified by virtue of Regulation 33, that all research analysts and entities are exempt from the client level segregation requirement for institutional clients through a standard waiver, by way of any electronically verifiable mode.
m. NISM Certification
All persons associated with research services, including sale staff, relationship managers etc., having ‘client contact’ must obtain the necessary NISM certification as per the explanation to Regulation 2 (ne) of the RA Regulations. However, this requirement is not applicable to clerical staff, administrative staff and any other person not having client contact and who has no connection with research services.
n. Compliance requirements for non-fee paying clients and institutional investors
At the outset, non-fee paying clients are also considered as ‘clients’ under the RA Regulations as the term ‘consideration’ includes non-cash benefits for providing research services.
It is clarified that non-paying clients are clients who receive research services as a ‘value added service’ bundled with other payable services from the same entity or another entity at a group level. Thus, research services provided by intermediaries such as brokers and merchant bankers as ‘value added services’ with the primary service are also considered as ‘for consideration’ even though the consideration may not be distinctly attributable to the research services.
Accordingly, analysts and research entities must also report non-fee paying clients to determine the deposit paying requirements under RA Regulations. Further, necessary disclosures and obtaining consent from such non-fee paying clients is mandatory, except institutional investors / QIB for whom mere disclosure is sufficient.
Most Important Terms and Conditions (MITC) Disclosure: In light of ease of doing business norms, consent on MITC is not mandatory for institutional investors or QIB’s and mere disclosure of the terms and conditions, including MITC to these clients shall suffice.
KYC is required only for fee paying clients.
Maintenance of Records: Recordkeeping of all interactions with clients is applicable to both paying and non-paying clientele. It has been clarified that recording is not mandatory for interactions having digital footprints, such as through emails. The objective behind application of this compliance requirement across every type of client, including institutional investors and QIB’s, is to ensure access to an effective grievance redressal mechanism for every investor by ensuring proper maintenance of records.
o. Rationale
All research recommendations, including technical recommendations, must have adequate documentary basis and relevant data, and must be substantiated by the rationale for arriving at the recommendation.
Lacuna beyond the clarifications: Dichotomy of regulation of research analysts & investment advisers
While the FAQ’s have brought about clarifications and guidance with respect to operational and practical aspects of the RA Regulations, it still does not address the recent change by the 2024 Amendment which aligns the legal and compliance requirements for research analysts with those provided by SEBI for ‘Investment Advisers’, particularly with respect to educational and certification requirements, client service segregation, disclosure norms and deposit requirements.
RA Regulations have been amended for research analysts to be regulated with a similar rigor as stipulated for investment advisers. However, there is a major difference in the roles and spheres in which investment advisers and research analysts operate.
Investment advisers provide personalized financial advice tailored to individual client profiles, whereas research analysts offer general market insights and recommendations without engaging in client-specific advisory. The risk profiles and fiduciary responsibilities of these roles differ significantly, yet the regulatory framework now imposes similar compliance burdens on both. This includes client-level disclosures and segregation of services, which may be disproportionate to the actual risk posed by research activities.
Such stringent norms can deter smaller entities and independent analysts from participating in the market, potentially stifling the flow of unbiased research. The lack of clear differentiation between the advisory and analytical reports can dilute the effectiveness of independent research and increase the compliance costs unnecessarily.
For a balanced and effective regulatory environment, the distinct nature of the roles of research analysts and investment advisers should be recognised. Protecting investors is paramount, but it must be achieved without undermining the accessibility and integrity of independent market analysis. This aspect of the RA Regulation remains to be addressed by SEBI.
[The authors are Executive Partner, Associate Partner and Senior Associate, respectively, in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys, Mumbai]
