FREQUENTLY ASKED QUESTIONS (FAQs)
SEBI (RESEARCH ANALYSTS)
REGULATIONS, 2014
Disclaimer: These FAQs are prepared with a view to guide market
participants on SEBI (Research Analysts) Regulations, 2014 ("RA
Regulations"). For full particulars of laws governing the Research
Analysts (RAs), please refer to the Acts/ Regulations/ Guidelines/ Circulars,
etc. appearing under the Legal Framework Section of SEBI website i.e.
www.sebi.gov.in.
Any
queries about the RA Regulations can be addressed to the Investment Management
Department- Division of Funds 1, SEBI. For an interpretation of a specific
provision of the Regulations, informal guidance may be sought as specified
under SEBI (Informal Guidance) Scheme 2003.
(1).
How the research analysts are regulated in India?
The
SEBI (Research Analysts) Regulations, 2014 (“RA Regulations”) were notified on
September 01, 2014.
The
RA Regulations have come into effect from December 01, 2014.
The
regulations specify conditions for registration, certification, limitations on
trading by research analysts, limitations on compensations of research analyst,
various disclosures to be made during public appearance and during making
recommendations through public media, code of conduct, records to be
maintained, manner of conducting inspection, etc. The RA Regulations are
available on the SEBI website www.sebi.gov.in.
(2).
What is the transition period provided for the existing persons acting as
research analyst or research entity for obtaining registration under RA
Regulations?
Transition
period of six (6) months from the date of commencement of RA Regulations has
been provided to the existing persons acting as research analyst or research
entity before commencement of the RA Regulations to comply with certification,
qualification, segregation of research activity from other activities, etc.
However,
they are required to file an application for grant registration within the said
period of six months from the commencement of the regulations i.e. December 01,
2014, to continue to do so thereafter.
Such
persons who have made applications for grant of registration can continue to do
so till the disposal of the application. The person who fails to file an
application for grant
of registration within the aforesaid
time period of six months from the commencement of the regulations, shall stop
acting as research analyst.
If any person found to be acting as research
analyst without making an application for grant of registration under RA
regulations after expiry of such period i.e. May 31, 2015, appropriate action
as deemed fit, under SEBI Act, 1992 may be initiated.[Ref. Regulation 3(1)].
(3).
Whether the individuals employed as research analyst with an entity are
required to obtain registration certificate under RA Regulations?
No.
Individuals employed as research analyst with an entity are not required obtain
registration certificate from SEBI.
The
research entity which employs individuals as research analysts is required to
obtain registration certificate under RA Regulations.
The
individuals employed as research analyst by research entity are required to
comply with qualification and certification requirements as specified in the
regulations. The trading limitations prescribed under the regulations are
applicable to them.[Ref Regulation 7 and 16]
(4).
Whether the personnel involved in publication activities like marketing and
editing are covered under the definition of Research Analyst under RA
Regulations.
The
RA Regulations do not cover personnel engaged in clerical activities/marketing
activities, back office assistance, support services, etc, in relation to
publication and/or distribution of research report.
As
per the regulations, “research analyst” means a person who is primarily
responsible for,-
i.
preparation or publication of the content of the research report; or
ii.
providing research report; or
iii.
making 'buy/sell/hold' recommendation; or
iv.
giving price target; or
v.
offering an opinion concerning public offer,
with
respect to securities that are listed or to be listed in a stock exchange,
whether or not any such person has the job title of 'research analyst' and
includes any other entities engaged in issuance of research report or research
analysis.
Explanation.-The term also
includes any associated person who reports.
(5).
What are all the communications excluded from the definition of research
report?
"Research
report” does not include the following communications:-
i. comments on general trends in the securities market
ii. discussions on the broad-based indices;
iii. commentaries on economic, political or market
conditions;
iv. periodic reports or other communications prepared for
unit holders of Mutual Fund or Alternative Investment Fund or clients of
Portfolio Managers and Investment Advisers;
v. internal communications that are not given to current or
prospective clients;
vi. communications that constitute offer documents or
prospectus that are circulated as per regulations made by SEBI
vii. statistical summaries of financial data of the companies
viii. technical analyses relating to the demand and supply in
a sector or index
ix.
any other communication which SEBI may specify from time to time [Ref.
Regulation 2(1)(w)]
(6).
Whether technical analysis is exempted under the purview of the RA Regulations?
Making
buy/sell/hold recommendation on individual stocks based on the technical
analysis is not exempted under the purview of the RA Regulations.
However,
technical analyses relating to the demand and supply for a particular sector or
index is exempted from the purview of the RA Regulations. [Ref. Regulation
2(1)(w)]
(7).
What are all communications excluded under periodic reports as per definition
of research report?
Periodic
reports such as sending financial account statements, annual reports and any
other communication as required under the specific regulations prepared for
unit holders of Mutual Fund (MF) or Alternative Investment Fund or clients of
Portfolio Managers and Investment Advisers are excluded from the definition of
research report under RA Regulations.
(8).
Does RA Regulations cover only equity and equity linked securities?
No.
RA Regulations covers all the securities as defined under clause (h) of section
2 of the Securities Contracts (Regulation) Act, 1956. Page 4 of 12
(9).
Who are all covered under the definition of Research Entity?
Intermediaries
registered with SEBI who is engaged in merchant banking or / investment banking
or / brokerage services or / underwriting services and issue research report or
/research analysis and other intermediaries to whom there is no specific
exemption under RA Regulations are covered under the definition of research
entity.
Accordingly,
SEBI registered Stock Brokers, Merchant Bankers and Underwriters and other
intermediaries except those who are exempted from making application under RA
Regulations are required to make application for grant of registration under RA
Regulations, if they are engaged in issuance of research reports or research
analyses. [refer to Regulation 2(v) for the definition of research entity]
(10).
Who is an independent research analyst?
"Independent
research analyst" means a person whose only business activity is research
analysis or / preparation and / / or publication of research report &
includes individuals engaged in providing research services without being
employed with any research entity(intermediary) and entities other than SEBI
registered intermediaries who are engaged in research activities. [refer to
Regulation 2(h)]
(11).
Who is a proxy adviser?
"Proxy
adviser” means any person who provide advice, through any means, to
institutional investor or shareholder of a company, in relation to exercise of
their rights in the company including recommendations on public offer or voting
recommendation on agenda items.[ Ref Regulation 2(1) (p)].
(12).
Whether proxy advisers are required to obtain registration under RA Regulations..?
Yes.
Proxy Advisers are required to obtain registration from SEBI under RA
Regulations.
(13).
What are the additional requirements to be fulfilled by proxy adviser?
All
the provisions of Chapter II, III, IV, V and VI of RA Regulations shall apply
mutatis mutandis to the proxy adviser. The proxy adviser shall additionally
disclose the following:
(i) the extent of research involved in a particular
recommendation and the extent and/or effectiveness of its controls and
procedures in ensuring the accuracy of issuer data;
(ii)
policies and procedures for interacting with issuers, informing issuers about
the recommendation and review of recommendations.
Proxy
adviser is required to maintain the record of his voting recommendations and
furnish the same to SEBI on request. [Ref. Regulation 23]
(14).
Who is required to make an application to get registration under RA
Regulations?
In
terms of the RA Regulations, no person shall act as a research analyst or
research entity or hold itself out as a research analyst unless he has obtained
a certificate of registration from SEBI on and from the commencement of RA
Regulations unless an exemption specifically applies. [Ref. Regulation 3(1)].
Independent
research analyst or research entity (intermediary) who is engaged in issuance
of research report or research analysis is required to make an application for
registration under RA Regulations.
(15).
What is the procedure of obtaining registration as a research analyst from
SEBI?
Application
shall be made in Form A as specified in RA Regulations with necessary
supporting documents.
A
section by the name "Research Analyst" has been created on the SEBI
website where in the details/circulars/press releases pertains to RA
regulations will be uploaded on a periodic basis.
A
document by the name "How to get registered as research analyst" has
also been uploaded under the relevant section.
(16).
Where to make an application to get registered as a research analyst?
The
application for grant of registration as a research analyst under RA
Regulations shall be filed with either the Head Office (HO) or the concerned
Regional Office(RO) / Local Office(LO) of the SEBI under the jurisdiction of
which the registered address of the applicant is located.
The
addresses of offices of SEBI are available on the website at www.sebi.gov.in and also on the linkhttp://www.sebi.gov.in/sebiweb/stpages/contact_us.jsp.
17.
Who are exempted from making application for grant of registration under RA
Regulations?
Investment
Advisers, Credit Rating Agencies, Asset Management Companies and Fund Managers
(i.e. fund managers of a mutual fund or alternative investment fund or venture
capital fund or portfolio manager) shall not be required to be registered under
these regulations.
However,
they are required to comply with Chapter III of these Regulations, if they
issue research reports or their research report is circulated or distributed to
public or general investors and/or if they or their directors or employees make
public appearance. [Ref. Regulation 3(1)].
(18).
Who are all covered under public media?
Any
persons who makes recommendation or offers an opinion concerning securities or
public offers to the general public through any media source available like
radio, television, internet, web or / print media are covered under the
definition of "public media".
(19).
Whether journalists who are on the payrolls of media organizations such as
newspaper or television are covered under definition of public media ?
Yes.
SEBI (Research analyst) Regulations, 2014 covers any person including
journalists who:
i. make public appearance or
ii.
make comments through the public media for giving opinion or recommendations
concerning securities or on public offers.
Journalists
employed by various news organizations and who comment on specific stock with
proper research, which get published in news paper, etc have to comply with
provisions specified under regulation 21(2) of SEBI (Research Analysts)
Regulations, 2014.
However,
RA regulations do not cover the following communications while making
recommendations through public media:
(i) general trends in the securities market;
(ii) discussions on the broad-based indices;
(iii) commentaries on economic, political or market
conditions;
(iv) statistical summaries of financial data of the companies
(v)
technical analyses relating to the demand and supply in a sector or index based
on trading volume and price
(20).
Whether journalists who are on the payrolls of media organizations such as
newspaper or / television are required to get registered with SEBI ?
No.
The journalists who are on the payrolls of media agency like newspaper or / television are not required to
get registered with SEBI.
However,
if they make public appearance or / makes a recommendation or / offers an
opinion concerning securities or / public offers through public media, all the
provisions of regulations 16 on limitations on trading and 17 on limitations on
compensation shall apply mutatis mutandis & they shall disclose their name,
registration status and details of financial interest in the subject company.
(21).
Whether the persons making recommendations through public media are required to
obtain registration under RA Regulations?
No.
Any person who makes recommendation or / offers an opinion concerning
securities /or public offers only through public media is not required to
obtain registration as research analyst under RA Regulations.
However,
whenever they make public appearance or / makes a recommendation or / offers an
opinion concerning securities or / public offers through public media, all the
provisions of regulations 16 on limitations on trading and 17 on limitations on
compensation shall apply mutatis mutandis to him/her and he/she shall disclose
his/her name, registration status and details of financial interest in the
subject company.
Further,
if such person is also engaged in preparation and/or publication of research
report or research analysis, he or the entity on whose behalf the he is acting
as a research analyst, needs to get registered with SEBI.
(22).
What are the disclosures required for making recommendations in public media?
Any
person including a director or employee of an investment adviser or credit
rating agency or asset management company or fund manager, makes public
appearance or makes a recommendation or offers an opinion concerning securities
or public offers through public media, all the provisions of regulations 16 on
limitations on trading and 17 on limitations on compensation shall apply
mutatis mutandis to him/her and he/she shall disclose his name, registration
status and details of financial interest in the subject company at the time of:
(i) making such recommendation or offering such opinion in
personal capacity;
(ii)
responding to queries from audiences or journalists in personal capacity;
(iii)
communicating the research report or substance of the research report through
the public media.
(23).
Whether any application fee is required to be paid at the time of making
application for grant of registration under RA Regulations and What is the
amount to be paid for grant of registration/renewal registration as research
analyst?
Yes.
Application fees must be paid along with the application Form for grant of
registration. Applicants who are individuals and firms including proxy advisers
are required to pay a sum of Rs. Five Thousand (Rs.5,000) as application fee at
the time of filing of application for grant of registration.
Applicants
who are body corporates and Limited Liability Partnership Firms (LLPs) are required
to pay a sum of Rs. Fifty Thousand (Rs. 50,000) as application fee at the time
of filing of application for grant of registration. [Ref. Second schedule of RA
Regulations].
Applicants
who are individuals and firms are required to pay a sum of Rs. Ten Thousand
(Rs.10,000) as registration fee at the time of grant of registration or renewal
of certificate by SEBI.
Applicants
who are proxy advisers are required to pay a sum of Rs. Ten Thousand
(Rs.10,000) as registration fee at the time of grant of registration or renewal
of certificate by SEBI.
|
Applicants who are body corporates and Limited Liability
Partnership Firms (LLPs) are required to pay a sum of Rs. Five Lakh (Rs.
5 lac) as registration fee at the time of grant or renewal of certificate
by SEBI. [Ref. Second schedule of RA Regulations] S. No.
|
Category
|
Application
Fee*
|
Registration
/Renewal Fee
|
|
1
|
Individual and Partnership Firms
|
Rs.
5,000
|
Rs.
10,000
|
|
2
|
Proxy Advisers
|
Rs.
5,000
|
Rs.
10,000
|
|
3
|
Body Corporate including Limited Liability Partnership
|
Rs.
50,000
|
Rs.5 lac
|
Src; SEBI
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