Here are Sebi’s new guidelines for independent advisers, research analysts | Stock Market News

The market regulator tightened rules for independent advisers and research analysts by imposing deposit requirements and restrictions on the scope of advice to enhance transparency and protect investors.

The new guidelines—following the amendment notified on 16 December—aim to reinforce compliance and ensure better segregation of services between independent advisers (IAs) and research analysts (RAs), according to norms released by the Securities and Exchange Board of India (Sebi) on Wednesday.

The key amendments include:

Deposit requirements

Sebi introduced a tiered deposit structure for IAs and RAs based on the maximum number of clients served on any given day during the previous financial year.

Up to 150 clients: ₹1 lakh

151 to 300 clients: ₹2 lakh

301 to 1,000 clients: ₹5 lakh

1,001 and above clients: ₹10 lakh

Existing IAs are required to comply with this provision by 30 June, while RAs must comply by 30 April. For new applicants, the deposit requirement will take effect immediately upon registration.

Registration flexibility

Sebi allowed individuals or partnership firms registered as RAs to also seek certification as IAs. These entities will now be required to comply with the rules and regulations under both the IA and RA frameworks.

To maintain independence, such entities must ensure clear segregation between their advisory and research functions, with a commitment to upholding an arm’s length relationship between the two.

This change also extends to part-time IAs and RAs, who may now engage in unrelated business activities or employment, provided these activities do not involve managing client funds or providing investment advice.

The eligibility of such part-time IAs and RAs will be determined based on their compliance with the qualification and certification requirements for full-time IAs or RAs.

Scope of investment advice

IAs are now explicitly restricted to providing investment advice on securities under Sebi’s purview.

However, they may also offer comprehensive financial planning services that include advice on products outside Sebi’s jurisdiction. In such cases, IAs must disclose to clients that these services are not regulated by Sebi and that clients have no recourse to Sebi for grievances related to non-Sebi products.

Additionally, IAs must obtain declarations and undertakings from clients regarding these non-Sebi products when onboarding new clients. For existing clients, this provision must be implemented by 30 April.

Revised fee structure

Sebi has allowed IAs greater flexibility in how they charge fees, with the option to change the mode of charging fees–from assets under advice (AUA) to a fixed fee and vice versa–at any time, without the previous restriction of a 12-month waiting period. The fee limits for the two modes are:

AUA: Capped at 2.5% of AUA per annum per family across all services.

Fixed: The maximum fee that can be charged is now ₹1,51,000 per annum per family, up from the previous ₹1,25,000.

Meanwhile, RAs can also charge a maximum fee of ₹1,51,000 per annum per family for individual and Hindu undivided family (HUF) clients in advance but not exceeding one quarter’s fees. This fee limit is subject to revision every three years based on the Cost Inflation Index (CII).

These provisions will take effect for new clients immediately, while the existing agreements will remain unchanged until their expiration or until 30 June.

Qualification, certification for RAs

Sebi revised the qualification and certification requirements for new applicants. The new RAs must hold a relevant professional qualification or a degree in fields like finance, economics, or business management, along with NISM certification.

Sebi clarified in the guidelines that the existing individual RAs or employees engaged in providing research services will not be required to meet the new qualifications but must continue to hold NISM certifications.

Enhanced KYC and record-keeping

The regulator has mandated RAs and research entities to enhance their ‘know your customer’ (KYC) procedures and maintain detailed records of all client interactions. These records should include written and signed documents, telephone recordings, emails, SMS messages, and any other legally verifiable communication. All records must be retained for a minimum of five years or until the resolution of any disputes, whichever is longer. RAs must ensure full compliance with these record-keeping requirements by 30 June.