Sebi to soon notify norms to regulate research analysts

Final norms will be issued soon after taking into account the entire consultation process

Market regulator Sebi is giving final touches to its new norms to regulate research analysts, which are aimed at warding off market manipulation through 'independent' reports on stocks and listed companies.

Sebi is currently analysing the comments submitted by the public and other stakeholders on its consultation paper and draft 'Research Analyst Regulations', while meetings are also being held with various participants in this regard, a senior official said.

Final norms would be issued soon after taking into account the entire consultation process, he added.

The Securities and Exchange Board of India (Sebi), in November last year, proposed new norms to regulate research analysts while clamping down on research services offered by foreign entities without getting registered in India. It had asked general public to give suggestions on the same by December 21, 2013.

Those to be regulated through new norms include independent research analysts, intermediaries that employ research analysts and issues research reports, as also research analysts giving recommendations in the public media such as TV channels, newspapers and websites.

As per the proposed norms, an entity incorporated outside India willing to provide research services in respect of Indian companies will have to set up a subsidiary in India and make an application for registration through that subsidiary.

The Sebi move has come against the backdrop of various cases of foreign entities coming out with research reports on India resulting in huge fall in share prices here.

One such case is that of Canada-based research firm Veritas Investment Research which had issued reports on DLF, Reliance and Indiabulls that had influenced the share price of these companies.

Sebi has come across instances where bear cartels have used negative issues raised in these reports to beat down the shares, while positive reports have been used to push the prices higher.

These proposals are based on recommendations by International Organisation of Securities Commissions (IOSCO) which has also suggested to Sebi that research analysts need to be subjected to appropriate oversight and regulation.

As per the proposal, research analysts cannot take a call which is contrary to the recommendations within 30 days before and five days after the publication of a research report. They cannot publish about or recommend securities of a company whose securities they have dealt in or traded within the previous 30 days.

The new norms suggest that Investment Advisers, Asset Management Companies, Proxy Advisory Service providers and fund managers of Alternative Investment Funds engaged in research services to their unit holders would not come under the ambit of these regulations.