SEBI Eases Path for Investment Advisers and Research Analysts:to Boost Investor Access

 

The Securities and Exchange Board of India (SEBI) has approved key changes to the regulatory framework for Investment Advisers (IAs) and Research Analysts (RAs). This initiative is a significant step toward simplifying compliance requirements, relaxing eligibility norms, and creating a more conducive environment for these professionals. These regulatory changes are expected to foster growth in the number of registered Investment Advisers and Research Analysts, while also ensuring that investors have greater access to qualified advisers and analysts, helping them make informed financial decisions.

SEBI’s aim with this review is to ensure that the evolving nature of Investment Advisers and Research Analysts businesses is reflected in a streamlined and updated regulatory framework. This comes at a crucial time when domestic investors are rapidly increasing, and their need for expert financial advice and research is becoming more prominent.

Key Highlights of the Approved Changes:

1. SEBI Relaxation in Eligibility Criteria for Investment Advisers and Research Analysts:

• Minimum Qualification Requirement:
  The minimum qualification for Investment Advisers and Research Analysts has been reduced to a graduate degree in specified fields. This move aims to widen the pool of eligible candidates by lowering the educational barrier without compromising on competency.
• No Experience Requirement for Registration:
  SEBI has removed the requirement of prior experience for registering as an Investment Advisers and Research Analysts. This is expected to make the entry process easier for new professionals entering the advisory and research fields, promoting growth in the industry.
• Certification at Registration Only:
  Investment Advisers and Research Analysts will now only need to obtain base certifications (NISM Series-XA and XB for IAs, and NISM Series-XV for RAs) initially at the time of registration. There will be no need to renew these certifications, though professionals will be required to update their knowledge with certifications focused on incremental changes and developments in the industry.
• Net-Worth Requirement Replaced with Deposits:
  The previous net-worth requirement has been replaced with a lower deposit requirement, making it easier for professionals to meet financial criteria and enter the advisory and research business.

2. SEBI Ease in Compliance Requirements for Investment Advisers and Research Analysts:

• Dual Registration as Both Investment Advisers and Research Analysts:
  Individuals or firms can now seek registration as both an Investment Advisers and Research Analysts simultaneously, offering more flexibility to professionals who wish to provide both advisory and research services.
• Part-Time Investment Advisers and Research Analysts Option for Individuals in Other Professions:
  Applicants engaged in non-securities-related business activities or employment can now register as Part-Time IAs or Part-Time RAs, provided they disclose their other activities and ensure no conflict of interest with their Investment Advisers and Research Analysts roles.
• Flexibility in Fee Structure:
  Investment Advisers will have the option to change the way they charge fees (either a fixed fee mode or Asset Under Advice (AUA)-based mode) while ensuring the fee remains within prescribed limits. Research Analysts will also have a maximum fee they can charge clients, with fee-related proof requirements limited to non-accredited investors and non-individual clients.
• Relaxation in Corporatization Threshold:
  Individual Investment Advisers will now have greater flexibility in growing their businesses before being required to corporatise. The threshold has been increased to 300 clients or fee collection of INR 3 crore during a financial year, whichever is earlier (up from 150 clients).
• Proxy Advisers Exempt from RAASB:
  Proxy advisers are now exempt from the Research Analyst Administration and Supervision Body (RAASB) framework, providing a clearer regulatory distinction.

3. SEBI Clarifications and Changes to Reflect the Evolving Business Nature Investment Advisers and Research Analysts :

• Clear Scope of Investment Advice:
  SEBI clarified that only investment advice related to securities falls under the purview of Investment Advisers regulations, ensuring a focused regulatory framework that excludes unrelated advice.
• Artificial Intelligence (AI) Use in Investment Advisers and Research Analysts Services:
  SEBI acknowledges the increasing role of AI in advisory and research services but emphasizes that the ultimate responsibility for the advice or research provided remains with the Investment Advisers and Research Analysts, regardless of the extent of AI tool usage.
• Guidelines for Model Portfolio Recommendations by Research Analysts:
  Clear guidelines were approved for Research Analysts who recommend model portfolios, ensuring consistency and transparency in how these recommendations are presented to clients.
• Clarification on Trading Call Providers:
  SEBI provided clarity on the regulatory treatment of trading call providers, stating that they do not fall under the IA Regulations but must comply with the SEBI (Research Analysts) Regulations, 2014. This distinction ensures proper oversight of trading call providers within the right regulatory framework.

Conclusion:

The proposed revisions to SEBI’s regulatory framework for Investment Advisers and Research Analysts represent a forward-looking approach aimed at improving the ease of doing business in this crucial sector. By reducing eligibility barriers and compliance burdens, SEBI is encouraging more professionals to enter the advisory and research space, which in turn will benefit the growing number of domestic investors seeking informed guidance. The use of modern tools like AI and the flexibility to operate part-time are indicative of SEBI’s recognition of the evolving landscape of financial advisory services. These changes will likely accelerate the growth of registered Investment Advisers and Research Analysts, contributing to a more robust and investor-friendly market in India.