SEBI comprehensive framework for the administration and supervision of Research Analysts (RAs) and Investment Advisers (IAs)

SEBI has introduced a comprehensive framework for the administration and supervision of Research Analysts (RAs) and Investment Advisers (IAs). This move marks a significant step towards enhancing regulatory oversight and ensuring investor protection in the Indian securities market.

Background and Regulatory Changes

The circular stems from Regulation 38A of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2024, which empowers recognized stock exchanges to administer and supervise specified intermediaries. Consequently, stock exchanges will now be recognized as Research Analyst Administration and Supervisory Bodies (RAASB) and Investment Adviser Administration and Supervisory Bodies (IAASB) for RAs and IAs, respectively.

Under the new framework, existing provisions for the administration and supervision of IAs, as outlined in previous circulars, stand rescinded. However, any actions taken under the previous framework will be deemed valid and applicable under the amended regulations.

Operationalization and Implementation Timeline

To operationalize the RAASB and IAASB framework, stock exchanges must fulfill specific criteria outlined in the circular. Initially, RAASB and IAASB will be consolidated within the same stock exchange to ensure efficiency and economies of scale.

The circular is set to become effective on July 25, 2024, ninety days after the publication of amendments to the SEBI (Research Analysts) Regulations, 2024, and the SEBI (Investment Advisers) Regulations, 2024, in the Official Gazette.

Implications and Benefits

The introduction of the RAASB and IAASB framework carries several implications and benefits for the securities market:

  1. Enhanced Regulatory Oversight: By designating stock exchanges as oversight bodies, SEBI aims to strengthen regulatory supervision over RAs and IAs. This move is crucial in maintaining market integrity and investor confidence.
  2. Streamlined Processes: Consolidating RAASB and IAASB within the same stock exchange streamlines administrative processes and facilitates better coordination between regulatory authorities and market participants.
  3. Investor Protection: The framework reinforces SEBI’s commitment to investor protection by ensuring that RAs and IAs adhere to stringent regulatory standards and ethical practices. This, in turn, safeguards investors against potential misconduct or misrepresentation.
  4. Industry Compliance: The circular underscores the importance of industry compliance with regulatory requirements. Stock exchanges, RAs, and IAs must adhere to the stipulated guidelines to maintain their status and uphold market integrity.
  5. Clarity and Transparency: By providing a clear framework for administration and supervision, the circular promotes transparency and clarity in regulatory processes. Market participants can better understand their obligations and responsibilities, leading to a more robust regulatory environment.

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