[1st September, 2014] 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 Securities and Exchange Board of India hereby, makes the following
regulations, to put in place a framework to register and regulate research
analysts, namely; CHAPTER I PRELIMINARY (1) These regulations may be
called the Securities and Exchange
Board of India (Research Analysts) Regulations, 2014. (2) These regulations shall
come into force on the ninetieth day from the date of their publication in the
Official Gazette. (1) In these regulations,
unless the context otherwise requires, the terms defined herein shall bear the
meanings assigned to them below, and their cognate expressions shall be
construed accordingly, (a) “Act” means the Securities
and Exchange Board of India Act, 1992 (15 of 1992); (b) “asset management company”
means a company as defined under clause(d) of Regulation 2 of Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996; (c) “associate” means an
associate as defined in Securities and Exchange Board of India (Intermediaries)
Regulations, 2008; (d) “Board” means the
Securities and Exchange Board of India established under Section 3 of the Act; (e) “certificate” means a
certificate of registration granted under these regulations; (f) “control” means control as
defined under the Companies Act, 2013; (g) “fund manager” includes
fund managers of a mutual fund or alternative investment fund or venture
capital fund or portfolio manager; (h) “independent research
analyst” means a person whose only business activity is research analysis or
preparation and/or publication of research report; (i) “inspecting authority”
means any one or more persons appointed by the Board to exercise powers
conferred under Regulation 27; (j) “investment adviser” means
any person registered under Securities and Exchange Board of India (Investment
Advisers) Regulations, 2013; (k) “limited liability
partnership” means a partnership formed and registered under The Limited
Liability Partnership Act, 2008(6 of 2009); (l) “merchant banking or
investment banking or brokerage services” includes, (i) acting as an underwriter; (ii) participating in a selling
or an offering for the issuer or otherwise acting in furtherance of a public
offer of the issuer; (iii) acting as an adviser in a
merger or acquisition; (iv) providing or arranging
venture capital or equity or debt; (v) serving as placement agent
for the issuer or otherwise acting in furtherance of a private offering of the
issuer; (vi) offering brokerage or
market making services; (m) “NBFC” means a Non-Banking
Financial Company registered by Reserve Bank of India; (n) “NISM” means the National
Institute of Securities Market established by the Board; (o) “price target” means
expectations of research analyst on the future performance of specific
securities; (p) “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; (q) “public appearance” means
any participation in a conference call, seminar, forum (including interactive
and non-interactive electronic forum), radio or television or internet or web
or print media broadcast, authoring a print media article or other public
speaking activity in public media in which a research analyst makes a
recommendation or offers an opinion, concerning securities or public offer: Provided that it does not
include a password protected webcast, conference call or such other events with
the clients, if all of the event participants previously received the research
report or other documentation that contains the required applicable disclosures
and that the research analyst appearing at the event corrects and updates
during the public appearance any disclosures in the research report that are
inaccurate, misleading or no longer applicable; (r) “public media” meansany
media source available to the general public and includes a radio, television,
internet, web or print media; (s) “public offer” includes
initial public offer, further public offer, offer for sale, disinvestment,
takeover, buy-back or delisting of securities; (t) “relative” means a person
as defined in sub-section (77) of Section 2 of the Companies Act, 2013 and who
is financially dependent on independent research analyst or individual research
analyst employed by research entity; (u) “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 directly or indirectly to such a research
analyst in connection with activities provided above; (v) “research entity” means an
intermediary registered with Board who is also engaged in merchant banking or
investment banking or brokerage services or underwriting services and issue
research report or research analysis in its own name through the individuals
employed by it as research analyst and includes any other intermediary engaged
in issuance of research report or research analysis; (w) “research report” means any
written or electronic communication that includes research analysis or research
recommendation or an opinion concerning securities or public offer, providing a
basis for investment decision and 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 the Board; (vii) statistical summaries of
financial data of the companies; (viii) technical analysis relating
to the demand and supply in a sector or the index; (ix) any other communication
which the Board may specify from time to time; (x) “securities” means
securities as defined in clause (h) of Section 2 of the Securities Contracts
(Regulation) Act, 1956; (y) “significant news or event”
means any news or event which is expected to have a material impact on, or that
reflects a material change to, the subject company's earnings, operations or
financial condition, other than unpublished price sensitive information, as
specified in the internal policies and procedures of the research analyst or
research entity; (z) “subject company” means the
company whose securities are the subject of a research report or a public
appearance; (za) “stock exchange” means a stock
exchange recognised under Section 4 of the Securities Contracts (Regulation)
Act, 1956 (42 of 1956); (zb) ”third
party research report” means a research report produced by a person or entity
other than the research analyst or research entity. (2) The words and expressions
used and not defined in these regulations but defined in the Act, the
Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Companies Act,
1956 and 2013, or any rules or regulations made thereunder shall have the same
meanings respectively assigned to them in those Acts, rules or regulations made
thereunder or any statutory modification or re-enactment thereto, as the case
may be. CHAPTER II REGISTRATION
OF RESEARCH ANALYSTS (1) On and from the
commencement of these 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 the Board under these regulations: Provided that any person
acting as research analyst or research entity before the commencement of these
regulations may continue to do so for a period of six months from such
commencement or, if it has made an application for a certificate of
registration under sub-regulation (2) within the said period of six months,
till the disposal of such application: Provided further that an
investment adviser, credit rating agency, asset management company or fund
manager, who issues research report or circulates/distributes research report
to public or its director or employee who makes public appearance, shall not be
required to seek registration under Regulation 3, subject to compliance of
Chapter III of these regulations. (2) An application for grant of
certificate of registration shall be made in Form A as specified in the First
Schedule to these regulations and shall be accompanied by a non-refundable
application fee to be paid in the manner specified in Second Schedule. Any person located outside
India engaged in issuance of research report or research analysis in respect of
securities listed or proposed to be listed on a stock exchange shall enter into
an agreement with a research analyst or research entity registered under these
regulations. (1) The Board may require the
applicant to furnish further information or clarification for the purpose of
consideration of the application filed under sub-regulation (2) of Regulation
3. (2) The applicant or his
authorised representative, if so required, shall appear before the Board for
personal representation. For the purpose of the
grant of certificate the Board shall take into account all matters which are
relevant to the grant of certificate of registration and in particular the
following, namely: (i) whether the applicant is an
individual or a body corporate or limited liability partnership firm; (ii) whether in case the
applicant is an individual, he is appropriately qualified and certified as
specified in Regulation 7; (iii) whether in case the
applicant is a body corporate, the individuals employed as research analyst are
qualified and certified as specified in Regulation 7; (iv) whether in case the
applicant is a partnership firm or a limited liability partnership, partners
engaged in issuance of research report or research analysis are qualified and
certified as specified in Regulation 7; (v) whether in case the
applicant is a research entity, the individuals employed as research analyst
are qualified and certified as specified in Regulation 7; (vi) whether the applicant
fulfills the capital adequacy requirements as specified in Regulation 8; (vii) whether the applicant,
individuals employed as research analyst and partners of the applicant, if any,
are fit and proper persons based on the criteria as specified in Schedule II of
the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; (viii) whether the applicant has
the necessary infrastructure to effectively discharge the activities of
research analyst; (ix) whether the applicant or
any person directly or indirectly connected with the applicant has in the past
been refused certificate by the Board and if so, the grounds for such refusal; (x) whether any disciplinary
action has been taken by the Board or any other regulatory authority against
the applicant or any person directly or indirectly connected to the applicant
under the respective Act, rules or regulations made thereunder. (1) An individual registered as
research analyst under these regulations, individuals employed as research
analyst and partners of a research analyst, if any, engaged in preparation
and/or publication of research report or research analysis shall have the
following minimum qualifications, at all times: (i) A professional
qualification or post-graduate degree or post graduate diploma in finance,
accountancy, business management, commerce, economics, capital market,
financial services or markets provided by: (a) a university which is
recognized by University Grants Commission or by any other
commission/council/board/body established under an Act of Parliament in India
for the purpose; or (b) an institute/association
affiliated with such university; or (c) an
institute/association/university established by the central government or state
government; or (d) autonomous institute
falling under administrative control of Government of India; or (ii) professional qualification
or post-graduate degree or post graduate diploma which is accredited by All
Indian Council for Technical Education, National Assessment and Accreditation
Council or National Board of Accreditation or any other council/board/body set
up under an Act of Parliament in India for the purpose; or (iii) [1][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] (iv) [2][a graduate in any
discipline with an experience of at least five years in activities relating to
financial products or markets or securities or fund or asset or portfolio
management. (2) An individual registered as
research analyst under these regulations, individuals employed as research
analyst and partners of a research analyst, if any, shall have, at all times, a
NISM certification for research analysts as specified by the Board or other
certification recognized by the Board from time to time: Provided that research
analyst or research entity already engaged in issuance of research report or
research analysis seeking registration under these regulations shall ensure
that it or the individuals employed by it as research analyst and/or its
partners obtain such certification within two years from the date of
commencement of these regulations: Provided further that fresh
certification must be obtained before expiry of the validity of the existing
certification to ensure continuity in compliance with certification
requirements. (1) Aresearch analyst who is
individual or partnership firm shall have net tangible assets of value not less
than one lakhrupees. (2) Aresearch analyst who is
body corporate or limited liability partnership firm shall have a networth of
not less than twenty five lakh rupees. (3) All existing research
analysts shall comply with the capital adequacy requirement within one year
from the date of commencement of these regulations. Explanation. For the purposes of this
regulation, “networth” means the aggregate value of paid up share capital plus
free reserves (excluding reserves created out of revaluation) reduced by the
aggregate value of accumulated losses. The Board on being
satisfied that the applicant complies with the requirements specified in
Regulation 6, shall send intimation to the applicant and on receipt of the
payment of registration fees as specified in Second Schedule, grant certificate
of registration in Form B under First Schedule, subject to such terms and conditions
as the Board may deem fit and appropriate. The certificate of
registration granted under Regulation 9 shall be valid [3][till
it is suspended or cancelled by the Board]. The research analyst who
has already been granted certificate of registration by the Board, prior to the
commencement of the Securities and Exchange Board of India (Research Analysts)
(Amendment) Regulations, 2016 shall be deemed to have been granted a
certificate of registration, subject to payment of fee, as prescribed in
Schedule II of these regulations.][4] (1) After considering an
application made under Regulation 3, if the Board is of the opinion that a
certificate should not be granted to the applicant, it may reject the
application after giving the applicant a reasonable opportunity of being heard. (2) The decision of the Board
to reject the application shall be communicated to the applicant within thirty
days of such decision. (3) Where an application for a
certificate is rejected by the Board, the applicant shall forthwith cease to
act as a research analyst: Provided that nothing
contained in this regulation shall affect the liability of the applicant under
the law. The certificate granted
under Regulation 9 shall, inter
alia, be subject to the following conditions: (i) the research analyst shall
abide by the provisions of the Act and these regulations; (ii) the research analyst shall
forthwith inform the Board in writing, if any information or particulars
previously submitted to the Board are found to be false or misleading in any
material particular or if there is any material change in the information
already submitted; (iii) research analyst registered
under these regulations shall use the term ‘research analyst’ in all
correspondences with its clients. (1) The Board may recognize any
body or body corporate for the purpose of regulating research analysts. (2) The Board may, at the time
of recognition of such body or body corporate, delegate administration,
supervision and regulation of research analysts to such body or body corporate
on such terms and conditions as may be specified by the Board. (3) The Board may specify that
no person shall act as research analyst unless he is a member of a recognized
body or body corporate and in such event, provisions of these regulations and
bye-laws or articles of such body or body corporate shall apply mutatis mutandis to such
research analyst. CHAPTER III MANAGEMENT
OF CONFLICTS OF INTEREST AND DISCLOSURE REQUIREMENTS (1) Research analyst or
research entity shall have written internal policies and control procedures
governing the dealing and trading by any research analyst for: (i) addressing actual or
potential conflict of interest arising from such dealings or trading of
securities of subject company; (ii) promoting objective and
reliable research that reflects the unbiased view of research analyst; and (iii) preventing the use of
research report or research analysis to manipulate the securities market. (2) Research analyst or
research entity shall have in place appropriate mechanisms to ensure
independence of its research activities from its other business activities. (1) Personal trading activities
of the individuals employed as research analyst by research entity shall be
monitored, recorded and where ever necessary, shall be subject to a formal
approval process. (2) Independent research
analysts, individuals employed as research analyst by research entity or their
associates shall not deal or trade in securities that the research analyst
recommends or follows within thirty days before and five days after the
publication of a research report. (3) Independent research
analysts, individuals employed as research analysts by research entity or their
associates shall not deal or trade directly or indirectly in securities that he
reviews in a manner contrary to his given recommendation. (4) Independent research
analysts, individuals employed as research analysts by research entity or their
associate shall not purchase or receive securities of the issuer before the
issuer's initial public offering, if the issuer is principally engaged in the
same types of business as companies that the research analyst follows or recommends. (5) Provisions of
sub-regulations (2) to (4) shall apply mutatis mutandis to a research entity unless it has
segregated its research activities from all other activities and maintained an
arms-length relationship between such activities. (6) Notwithstanding anything
contained in sub-regulations (2) to (4), such restrictions to trade or deal in
securities may not apply in case of significant news or event concerning the
subject company or based upon an unanticipated significant change in the
personal financial circumstances of the research analyst, subject to prior
written approval as per the terms specified in the approved internal policies
and procedures. (1) Research entity shall not
pay any bonus, salary or other form of compensation to any individual employed
as research analyst that is determined or based on any specific merchant
banking or investment banking or brokerage services transaction. (2) The compensation of all
individuals employed as research analyst shall be reviewed, documented and
approved annually by board of directors/committee appointed by board of
directors of the research entity, which does not consist of representation from
its merchant banking or investment banking or brokerage services divisions. (3) The board of
directors/committee appointed by board of directors of the research entity
approving or reviewing the compensation of individual employed as research
analyst shall not take into account such individual's contribution to the
research entity's investment banking or merchant banking or brokerage services
business. (4) An individual employed as
research analyst by research entity shall not be subject to the supervision or
control of any employee of the merchant banking or investment banking or
brokerage services divisions of that research entity. (1) Research analyst or
research entity shall not publish or distribute research report or research
analysis or make public appearance regarding a subject company for which he has
acted as a manager or co-manager at any time falling within a period of: (a) Forty days immediately
following the day on which the securities are priced if the offering is an
initial public offering; or (b) Ten days immediately
following the day on which the securities are priced if the offering is a
further public offering: Provided that research
analyst or research entity may publish or distribute research report or research
analysis or make public appearance within such forty day and ten day periods,
subject to prior written approval of legal or compliance personnel as specified
in the internal policies and procedures. (2) A research entity who has
agreed to participate or is participating as an underwriter of an issuer's
initial public offering shall not publish or distribute a research report or
make public appearance regarding that issuer before expiry of twenty five days
from the date of the offering. Explanation. For the purposes
of sub-regulations (1) and (2), the date of the offering refers to the first
date on which the security was offered to the public. (3) Research analyst or
research entity who has acted as a manager or co-manager of public offering of
securities of a company shall not publish or distribute a research report or
make a public appearance concerning that company within fifteen days prior to
date of entering into and fifteen days after the expiration/waiver/termination
of a lock-up agreement or any other agreement that the research analyst or
research entity has entered into with a subject company that restricts or
prohibits the sale of securities held by the subject company after the
completion of public offering of securities: Provided that research
analyst or research entity may publish or distribute research report or
research analysis or make public appearance regarding that company within such
fifteen days subject to prior written approval of legal or compliance personnel
as specified in the internal policies and procedures. (4) Research analyst or
individuals employed as research analyst by research entity shall not
participate in business activities designed to solicit investment banking or
merchant banking or brokerage services business, such as sales pitches and deal
road shows. (5) Research analyst or
individuals employed as research analyst by research entity shall not engage in
any communication with a current or prospective client in the presence of
personnel from investment banking or merchant banking or brokerage services
divisions or company management about an investment banking services
transaction. (6) Investment banking or
merchant banking or brokerage services division's personnel of research entity
shall not direct the individuals employed as research analyst to engage in
sales or marketing related to an investment banking or merchant banking or
brokerage services and shall not direct the research analyst to engage in any
communication with a current or prospective client about such division's
transaction: Provided that
sub-regulations (4) to (6) shall not prohibit research analyst or research
entity from engaging in investor education activities including publication of
pre-deal research and briefing the views of the research analyst on the
transaction to the sales or marketing personnel. (7) Research analyst or
research entity shall have adequate documentary basis, supported by research,
for preparing a research report. (8) Research analyst or
research entity shall not provide any promise or assurance of favourable review
in its research report to a company or industry or sector or group of companies
or business group as consideration to commence or influence a business
relationship or for the receipt of compensation or other benifits. (9) Research analyst or research
entity shall not issue a research report that is not consistent with the views
of the individuals employed as research analyst regarding a subject company. (10) Research entity shall
ensure that the individuals employed as research analyst are separate from
other employees who are performing sales trading, dealing, corporate finance
advisory or any other activity that may affect the independence of its research
report: Provided that the
individual employed as research analyst by research entity can receive feedback
from sales or trading personnel of brokerage division to ascertain the impact
of research report. A research analyst or
research entity shall disclose all material information about itself including
its business activity, disciplinary history, the terms and conditions on which
it offers research report, details of associates and such other information as
is necessary to take an investment decision, including the following: (i) Research analyst or research
entity shall disclose the following in research report and in public appearance
with regard to ownership and material conflicts of interest: (a) whether the research
analyst or research entity or his associate or his relative has any financial
interest in the subject company and the nature of such financial interest; (b) whether the research
analyst or research entity or its associates or relatives, have
actual/beneficial ownership of one per cent. or more securities of the subject
company, at the end of the month immediately preceding the date of publication
of the research report or date of the public appearance; (c) whether the research
analyst or research entity or his associate or his relative, has any other
material conflict of interest at the time of publication of the research report
or at the time of public appearance; (ii) Research analyst or
research entity shall disclose the following in research report with regard to
receipt of compensation: (a) whether it or its
associates have received any compensation from the subject company in the past
twelve months; (b) whether it or its
associates have managed or co-managed public offering of securities for the
subject company in the past twelve months; (c) whether it or its
associates have received any compensation for investment banking or merchant
banking or brokerage services from the subject company in the past twelve
months; (d) whether it or its
associates have received any compensation for products or services other than
investment banking or merchant banking or brokerage services from the subject
company in the past twelve months; (e) whether it or its
associates have received any compensation or other benefits from the subject
company or third party in connection with the research report. (iii) Research analyst or
research entity shall disclose the following in public appearance with regard
to receipt of compensation: (a) whether it or its
associates have received any compensation from the subject company in the past
twelve months; (b) whether the subject company
is or was a client during twelve months preceding the date of distribution of
the research report and the types of services provided: Provided that research
analyst or research entity shall not be required to make a disclosure as per
sub-clauses (c), (d) and (e) of clause (ii) or sub-clauses (a) and (b) of
clause (iii) to the extent such disclosure would reveal material non-public
information regarding specific potential future investment banking or merchant
banking or brokerage services transactions of the subject company. (iv) whether the research
analyst has served as an officer, director or employee of the subject company; (v) whether the research analyst
or research entity has been engaged in market making activity for the subject
company; (vi) Rese arch analyst or
research entity shall provide all other disclosures in research report and
public appearance as specified by the Board under any other regulations. (1) Research analyst or
research entity shall take steps to ensure that facts in its research reports
are based on reliable information and shall define the terms used in making
recommendations, and these terms shall be consistently used. (2) Research analyst or
research entity that employs a rating system must clearly define the meaning of
each such rating including the time horizon and benchmarks on which a rating is
based. (3) If a research report
contains either a rating or price target for subject company's securities and
the research analyst or research entity has assigned a rating or price target
to the securities for at least one year, such research report shall also
provide the graph of daily closing price of such securities for the period
assigned or for a three-year period, whichever is shorter. (1) Research analyst or
research entity including its director or employee shall disclose the
registration status and details of financial interest in the subject company,
if he makes public appearance. (2) If 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 and 17 shall
apply mutatis mutandis to
him and he 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. (1) A research report shall not
be made available selectively to internal trading personnel or a particular
client or class of clients in advance of other clients who are entitled to
receive the research report. (2) Research analyst or
research entity who distributes any third party research report shall review
the third party research report for any untrue statement of material fact or
any false or misleading information. (3) Research analyst or
research entity who distributes any third party research report shall disclose
any material conflict of interest of such third party research provider or he
shall provide a web address that directs a recipient to the relevant
disclosures. (4) Provisions of
sub-regulations (2) and (3) shall not apply to a research analyst or research
entity if he has no direct or indirect business or contractual relationship
with such third party research provider. (1) All the provisions of
Chapter II, III, IV, V and VI shall apply mutatis mutandis to the proxy adviser: Provided that the employees
of proxy advisors engaged in providing proxy advisory services shall be
required to have a minimum qualification of being a graduate in any discipline: Provided further that
certification requirements for employees of proxy advisors engaged in providing
proxy advisory services shall be as specified by the Board: Provided further that time
period for compliance with capital adequacy as provided in sub-regulation (3)
of Regulation 8, for proxy advisors shall be three years. (2) 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; (3) Proxy adviser shall
maintain the record of his voting recommendations and furnish the same to the
Board on request. (4) In case of any inconsistency
or difficulty in respect of applicability of provisions of these regulations to
proxy advisers, the Board may issue such clarifications or exemptions as may be
deemed appropriate. (1) Research analyst or
research entity shall maintain an arms-length relationship between its research
activity and other activities. (2) Research analyst or
research entity shall abide by Code of Conduct as specified in Third Schedule. (3) In case of change in
control of the research analyst or research entity, prior approval from the
Board shall be taken. (4) Research analyst or
research entity shall furnish to the Board information and reports as may be
specified by the Board from time to time. (5) It shall be the
responsibility of the research analyst or research entity to ensure that its
employees or partners, as may be applicable, comply with the certification and
qualification requirements under Regulation 7 at all times. (1) Research analyst or
research entity shall maintain the following records: (i) research report duly signed
and dated; (ii) research recommendation
provided; (iii) rationale for arriving at
research recommendation; (iv) record of public
appearance. (2) All records shall be
maintained either in physical or electronic form and preserved for a minimum
period of five years: Provided that where records
are required to be duly signed and are maintained in electronic form, such
records shall be digitally signed. (3) Research analyst or
research entity shall conduct annual audit in respect of compliance with these
regulations from a member of Institute of Chartered Accountants of India or
Institute of Company Secretaries of India. Research analyst or
research entity which isa body corporate or limited liability partnership firm
shall appoint a compliance officer who shall be responsible for monitoring the
compliance of the provisions of the Act, these regulations and circulars issued
by the Board. CHAPTER IV INSPECTION The Board may Suo motu or upon receipt of
information or complaint appoint one or more persons as inspecting authority to
undertake inspection of the books of accounts, records and documents relating
to research analyst or research entity for any of the following reasons,
namely: (i) to ensure that the books of
account, records and documents are being maintained in the manner specified in
these regulations; (ii) to inspect into complaints
received from any person, on any matter having a bearing on the activities of a
research analyst; (iii) to ascertain whether the
provisions of the Act and these regulations are being complied with by the
research analyst or research entity; (iv) to inspect into the affairs
of research analyst or research entity in relation to research activities, in
the interest of the securities market or in the interest of investors. (1) Before ordering an
inspection under Regulation 27, the Board shall give not less than seven days
notice to research analyst or research entity. (2) Notwithstanding anything
contained in sub-regulation (1), where the Board is satisfied that in the
interest of the investors no such notice should be given, it may by an order in
writing direct that the inspection of the affairs of the research analyst or
research entity be taken up without such notice. (3) During the course of an
inspection, the research analyst or research entity against whom the inspection
is being carried out shall be bound to discharge its obligations as provided in
Regulation 29. (1) It shall be the duty of
every research analyst or research entity in respect of whom an inspection has
been ordered under the Regulation 27 and any other associate person who is in
possession of relevant information pertaining to conduct and affairs of such
research analyst or research entity including their representative, if any, to
produce to the inspecting authority such books, accounts and other documents in
his custody or control and furnish him with such statements and information as
the inspecting authority may require for the purposes of inspection. (2) It shall be the duty of
research analyst or research entity and any other associate person who is in
possession of relevant information pertaining to conduct and affairs of the
research analyst to give to the inspecting authority all such assistance and
shall extend all such co-operation as may be required in connection with the
inspection and shall furnish such information as sought by the inspecting
authority in connection with the inspection. (3) The inspecting authority
shall, for the purposes of inspection, have power to examine on oath and record
the statement of any employee, director, partner or person responsible for or
connected with the activities of research analyst or research entity or any
other associate person having relevant information pertaining to such research
analyst or research entity. (4) The inspecting authority
shall, for the purposes of inspection, have power to obtain authenticated
copies of documents, books, accounts of research analyst or research entity,
from any person having control or custody of such documents, books or accounts. The inspecting authority
shall, as soon as possible, on completion of the inspection submit an
inspection report to the Board: Provided that if directed
to do so by the Board, the inspecting authority may submit an interim report. The Board may after
consideration of the inspection report and after giving reasonable opportunity
of hearing to research analyst or research entity or its authorized
representatives, without prejudice to any other action under the Act, issue
such directions as it deems fit in the interest of securities market or the
investors including requiring research analyst or research entity not to
provide research recommendation for a particular period; (i) requiring the research
analyst or research entity to refund any money collected as fees, charges or
commissions or otherwise to the concerned clients along with the requisite
interest. (ii) prohibiting the research
analyst or research entity from operating in the capital market or accessing
the capital market for a specified period. CHAPTER V PROCEDURE
FOR ACTION IN CASE OF DEFAULT Research analyst or
research entity who: (i) contravenes any of the
provisions of the Act or any regulations or circulars issued thereunder; (ii) fails to furnish any
information relating to its activity as a research analyst as required by the
Board; (iii) furnishes to the Board
information which is false or misleading in any material particular; (iv) does not submit periodic
returns or reports as required by the Board; (v) does not co-operate in any
enquiry, inspection or investigation conducted by the Board; (vi) fails to resolve the
complaints or fails to give a satisfactory reply to the Board in this behalf, shall
be dealt with in the manner provided under the Act or the Securities and
Exchange Board of India (Intermediaries) Regulations, 2008. [5][CHAPTER V-A POWER TO
RELAX STRICT ENFORCEMENT OF THE REGULATIONS (1) The Board may, exempt any
person or class of persons from the operation of all or any of the provisions
of these regulations for a period as may be specified but not exceeding twelve
months, for furthering innovation [6][*
* *] relating to testing new products, processes, services, business models,
etc. in live environment of regulatory sandbox in the securities markets. (2) Any exemption granted by
the Board under sub-regulation (1) shall be subject to the applicant satisfying
such conditions as may be specified by the Board including conditions to be
complied with on a continuous basis. Explanation. For the purposes of these
regulations, “regulatory sandbox” means a live testing environment where new
products, processes, services, business models, etc. may be deployed on a
limited set of eligible customers for a specified period of time, for
furthering innovation in the securities market, subject to such conditions as
may be specified by the Board.] CHAPTER VI MISCELLANEOUS In order to remove any
difficulties in the application or interpretation of these regulations, the
Board may issue clarifications and guidelines in the form of circulars. The Board reserves the
right to alter, modify and overrule any decision, action taken or penalties
imposed by the body or body corporate recognized under Regulation 14. FIRST
SCHEDULE FORM
A Securities
and Exchange Board of India (Research
Analysts) Regulations, 2014 [7][See Regulation
3] [8][Application for grant of
certificate of registration] SEBI Bhavan, C4-A, G Block,
Bandra Kurla Complex, Bandra (East), Mumbai-400051 India INSTRUCTIONS (1) This form is meant for use
by the applicant for grant of certificate of registration as a research
analyst. (2) The applicant should
complete this form, and submit it, along with all supporting documents to the
Board at its head office at Mumbai. (3) This application form
should be filled in accordance with these regulations. (4) The application shall be
considered by the Board provided it is complete in all respects. (5) All answers must be legible
and all the pages must be numbered with signature/stamp on each page of the
form. (6) Information which needs to
be supplied in more detail may be given on separate sheets which should be
attached to the application form and appropriately numbered. (7) The application must be
signed. (8) The application must be
accompanied by an application fee as specified in the Second Schedule to these
regulations. (1)
GENERAL INFORMATION (a) Name, address of the
registered office, address for correspondence and principal place of business,
telephone number(s), fax number(s), e-mail address of the applicant. (b) PAN of the applicant. (c) [9][* * *] (d) Name, direct line number,
mobile number and e-mail of the contact person(s). (e) Date and place of
incorporation/establishment, if any. If the applicant is incorporated outside
India, details of such incorporation. (f) Whether the applicant is
engaged in preparation of research reports or research analyses prior to making
application under these regulations. (g) Whether the applicant is
registered with SEBI, RBI, IRDA or PFRDA in any capacity. If so, details of
such registration. (h) Name and activities of associate
companies/concerns of the applicant. (i) Write-up on the activities
of the applicant. (2)
DETAILS OF APPLICANT: (a) Legal structure of
applicant - Whether the applicant is an individual, body corporate (including
company), partnership firm or limited liability partnership. (b) Shareholding
pattern/beneficial ownership pattern of the applicant, if applicant is other
than individual (Enclose identity proof and address proof of the applicant/directors/partners/beneficial
owners). (c) Whether the applicant or
research analysts employed by the applicant or partners of the applicant
has/have necessary qualification as specified in Regulation 7. (d) Number of research analysts
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 research analysts employed). (e) Declaration by the
applicant that the research analysts employed, partners of the applicant, if
any, currently comply with the qualification requirements under Regulation 7.
(Provide self certified copies of supporting documents) (If the applicant is an
existing research analyst applying for fresh registration, then he shall
provide a declaration stating that the applicant shall comply with the
certification requirements for research analysts employed under these
regulations and partners of the applicant, if any, within two years from the
date of commencement of these regulations and shall submit a copy of the
certification to the Board within fifteen days of receipt of such
certification.) (f) Declaration by the
applicant that it shall ensure that the research analyst employed and partners
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. (g) Copy of Income Tax
Return/Copy of Form 16 for the last 3 years in case of individual applicant. (h) Net worth certificate or
certified copy of assets and liabilities statement or certification of net
tangible assets of the applicant certified by a chartered accountant, not more
than six months old at the time of filing of application. Please note that
membership number of the Chartered accountant must be included in the
certificate. (3)
DETAILS OF RESEARCH SERVICES (a) Details of the proposed
research services (b) Details about internal
policies and procedures to effectively address conflict of interest (c) Details about the standard
disclosures to be provided (d) Any other relevant
information pertaining to research services provided (4)
DETAILS OF INFRASTRUCTURE. (a) Details of office space,
office equipment, furniture and fixtures, communication facilities, research
capacity, research software for undertaking research analysis. (b) Declaration that the
applicant has the necessary infrastructure to effectively discharge the
activities of research analyst. (5)
OTHER INFORMATION/DECLARATIONS/REGULATORY ACTIONS (a) Details of all settled and
pending disputes in the last 5 years. (b) Whether any previous
application for grant of certificate made by any person directly or indirectly
connected with the applicant has been rejected by the Board; If yes, provide
details of the same. (c) Whether any disciplinary
action has been taken by the Board or any other regulatory authority against
any person directly or indirectly connected with the applicant under the Act or
the regulations made there under in the last 5 years. If yes, provide details
of the action. (d) Whether the
applicant/directors/promoters/partners have been indicted/involved in any
economic offence in the last 5 years. If yes, provide details of the same. (e) Declaration that the
applicant, research analyst' employed by it, its representatives and partners,
if any, are fit and proper persons based on the criteria as specified in
Schedule II of the Securities and Exchange Board of India (Intermediaries)
Regulations, 2008. (f) Declaration that the
applicant shall comply with Chapter of III of the Regulations. (g) Any other information
considered relevant to the nature of services to be rendered by the applicant. (6)
DECLARATION STATEMENT I/We hereby agree and declare
that the information supplied in the application, including the attachment
sheets, is complete and true. AND I/we further agree
that, I/we shall notify the Securities and Exchange Board of India immediately
any change in the information provided in the application. I/We further agree that
I/we shall comply with, and be bound by the Securities and Exchange Board of
India Act, 1992, and the Securities and Exchange Board of India (Research
Analysts) Regulations, 2014, guidelines/instructions as may be issued by the
Securities and Exchange Board of India from time to time. I/We further agree that as
a condition of registration, I/we shall abide by such operational
instructions/directives as may be issued by the Securities and Exchange Board
of India from time to time. For
and on behalf of_______________________________________________________ (Name
of the applicant) Authorized
signatory/Applicant (Signature) (Date
and Place) Form
B Securities
and Exchange Board of India (Research Analysts) Regulations, 2014 [See Regulation 9] Certificate of registration
as 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 research analyst
subject to the conditions specified in the Act and in the regulations made
thereunder. II. The Registration Number is
IN/RA/_______________________. III. [10][This certificate of
registration shall be valid till it is suspended or cancelled by the Board.] Date: Place : MUMBAI For
and on behalf of Securities
and Exchange Board of India SECOND
SCHEDULE Securities
and Exchange Board of India (Research Analysts) Regulations, 2014 [See Regulation 3(2) and Regulation 9] FEES (1) [11][Every applicant shall pay
non-refundable application fees along with the application for grant of
certificate of registration as under: (i) For individuals or
partnership firms : Rupees 5000; (ii) For proxy advisory firms :
Rupees 5000; (iii) For Body Corporate
including Limited Liability Partnerships : Rupees 50000.] (2) [12][Every applicant shall pay
registration fee at the time of grant of certificate of registration by the
Board as under: (i) For individuals or
partnership firms : Rupees 10000; (ii) For proxy advisory firms :
Rupees 10000; (iii) For Body Corporate
including Limited Liability Partnerships : Rupees 500000.] (3) [13][A Research Analyst who has
been granted a certificate of registration, to keep its registration in force,
shall pay fee prescribed at paragraph 2 above every five years, from the date
of grant of certificate of registration or from the date of grant of
certificate of registration granted prior to the commencement of the Securities
and Exchange Board of India (Change in Conditions of Registration of Certain
Intermediaries) (Amendment) Regulations, 2016, as the case may be, within three
months before expiry of the period for which fee has been paid.] (4) [14][The fee referred to in
paragraph 2 shall be paid by the applicant within fifteen days from the date of
receipt of intimation from the Board by way of demand draft in favour of
‘Securities and Exchange Board of India’ payable at Mumbai or at respective
regional or local office or by way of by way of direct credit in the bank
account through NEFT/RTGS/IMPS or any other mode allowed by RBI”.] (5) [15][* * *] (6) [16][* * *] THIRD
SCHEDULE [See sub-regulation (2) of Regulation 24] CODE OF CONDUCT FOR
RESEARCH ANALYST 1.
Honesty and Good Faith Research analyst or
research entity shall act honestly and in good faith. 2.
Diligence Research analyst or
research entity shall act with due skill, care and diligence and shall ensure
that the research report is prepared after thorough analysis. 3.
Conflict of Interest Research analyst or
research entity shall effectively address conflict of interest which may affect
the impartiality of its research analysis and research report and shall make
appropriate disclosures to address the same. 4.
Insider Trading or front running Research analyst or
research entity or its employees shall not engage in insider trading or front
running or front running of its own research report. 5.
Confidentiality Research analyst or
research entity or its employees shall maintain confidentiality of report till
the report is made public. 6.
Professional Standard Research analyst or
research entity or its employees engaged in research analysis shall observe
high professional standard while preparing research report. 7.
Compliance Research analyst or
research entity shall comply with all regulatory requirements applicable to the
conduct of its business activities. 8.
Responsibility of senior management The senior management of research
analyst or research entity shall bear primary responsibility for ensuring the
maintenance of appropriate standards of conduct and adherence to proper
procedures. [1]
Inserted vide the Securities and Exchange Board of India (Research Analysts)
(Amendment) Regulations, 2021 w.e.f. 16-3-2021. [2]
Renumbered vide the Securities and Exchange Board of India (Research Analysts)
(Amendment) Regulations, 2021 w.e.f. 16-3-2021. [3]
Substituted for the words “for a period of five years from the date of its
issue” vide the Securities and Exchange Board of India (Change In Conditions Of
Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f.
08-12-2016. [4]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution Regulation 11 read as under: “11. (1) Three months before the expiry of
the period of validity of the certificate, the research analyst may, if he so
desires, make an application in Form A for grant of renewal of certificate of
registration. (2) The application for renewal under
sub-regulation (1) shall be dealt with in the same manner as if it were an
application made under sub-regulation (2) of Regulation 3 for grant of
certificate.” [5]
Ins. by Noti. No. SEBI/LAD-NRO/GN/2020/10, dated 17-4-2020 (w.e.f. 17-4-2020). [6]
The words “in technological aspects” omitted by Noti. No. SEBI/LAD-NRO/GN/2021/30,
dated 3-8-2021 (w.e.f. 3-8-2021). [7]
Substituted for the words “See Regulations 3(2) and 11” vide the Securities and
Exchange Board of India (Change In Conditions Of Registration Of Certain
Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016. [8]
Substituted for the words “Application for Grant of Certificate of
Registration/Renewal as Research Analyst Securities and Exchange Board of
India” vide the Securities and Exchange Board of India (Change In Conditions Of
Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f.
08-12-2016. [9]
Omitted vide the Securities and Exchange Board of India (Change In Conditions
Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f.
08-12-2016. Prior to omission, sub-para (c) read as under: “(c) Whether application is for
registration/renewal. Provide registration number if the application is for
renewal of certificate.” [10]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution, Paragraph III read as under: “III..Unless renewed, the certificate of
registration is valid______ from to ______.” [11]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution, Paragraph 1. read as under: “Every individual applicant including
partnership firms shall pay non-refundable application fees of five thousand
rupees and others shall pay non-refundable application fees of fifty thousand
rupees along with the application for grant or renewal of certificate of
registration.” [12]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution, Paragraph 2. read as under: “2. Applicants who are individuals or
partnership firms shall pay a sum of ten thousand rupees as
registration/renewal fee at the time of grant or renewal of certificate by the
Board.” [13]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution, Paragraph 3. read as under: “A body corporate including limited liability
partnership firm shall pay a sum of five lakh rupees as registration/renewal
fee at the time of grant or renewal of certificate by the Board.” [14]
Substituted vide the Securities and Exchange Board of India (Change In
Conditions Of Registration Of Certain Intermediaries) (Amendment) Regulations,
2016 w.e.f. 08-12-2016. Prior to substitution, Paragraph 4. read as under: “Every applicant who is engaged in providing
proxy advisory services shall pay non-refundable application fees of five
thousand rupees with the application for grantor renewal of certificate of registration.” [15]
Omitted vide the Securities and Exchange Board of India (Change In Conditions
Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f.
08-12-2016. Prior to omission, Paragraph 5. read as under: “Applicants who are engaged in providing
proxy advisory services shall pay a sum of ten thousand rupees as
registration/renewal fee at the time of grant or renewal of certificate by the
Board.” [16]
Omitted vide the Securities and Exchange Board of India (Change In Conditions
Of Registration Of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f.
08-12-2016. Prior to omission, Paragraph 6. read as under: “The fee referred to in paragraph 1, 2, 3, 4
and 5 shall be paid by the applicant within fifteen days from the date of
receipt of intimation from the Board by a demand draft in favor of ‘Securities
and Exchange Board of India’ payable at Mumbai.”Securities
and Exchange Board of India (Research Analysts) Regulations, 2014