RAs And IAs To Take On Additional Responsibilities

Research analysts and investment advisors will now have to comply with the additional requirements introduced under the recently notified amendment regulations and the associated guidelines.

Last month, the Securities and Exchange Board of India (SEBI) notified amendments to the SEBI (Research Analysts) Regulations, 2014 (RA Regulations)[1], and the SEBI (Investment Advisers) Regulations, 2013 (IA Regulations)[2], introducing added responsibilities for research analysts and investment advisors. Notably, the extent of the use of Artificial Intelligence (AI) tools in providing research services or investment advice needs to be disclosed to clients. As per the guidelines dated January 8, 2025[3], this disclosure has to be made at the time when the terms and conditions of research services are disclosed. In the case of investment advisors, the extent of such use has to be disclosed at the time of entering into the investment advisory agreement with the client. It is stated that the research analysts or investment advisors will be solely responsible for the security of the client data and research services/ investment advice based on the output of AI tools.

The new guidelines also set the terms and conditions for individuals or partnership firms registered as investment advisors for the grant of certificate of registration as research analysts. These involve compliance with rules, regulations, or reporting requirements under the RA Regulations and IA Regulations separately. It also envisages the submission of an undertaking to the effect that a) it will maintain an arms-length relationship between its activity as an investment advisor and research analyst, and b) it will ensure clear segregation of its investment advisory services and research services.

Further, the guidelines specify requirements pertaining to the deposit to be maintained by research analysts and investment advisors. The amount depends on the maximum number of clients and ranges from INR 1 Lakh to INR 10 Lakhs. These requirements would be reviewed from time to time.

The other provisions concern the maintenance of records, carrying out of annual audits, operation of functional websites, etc.

[1] Click here to download the SEBI (Research Analysts) (Third Amendment) Regulations, 2024

[2] Click here to download the SEBI (Investment Advisers) (Second Amendment) Regulations, 2024

[3] Click here and here to access the new guidelines for research analysts and investment advisers