Sebi norms for research analysts to come into effect on Monday

To safeguard investors from misleading advice coming from unregulated entities, a new set of regulations for research analysts in capital markets would come into effect from Monday.
Announcing these new regulations -- which would be a first in India -- Sebi said no person or entity would be allowed to act as research analyst or research entity without obtaining a certificate of registration from it under these regulations.
The regulations were finalised in September this year and are aimed at safeguarding Indian markets from any manipulative research reports including by foreign entities.
The new norms, which also cover 'proxy' advisors or those providing advisory services similar to research analysts, were framed in the wake of various instances of 'mischievous' research reports getting circulated among the investors to manipulate the overall market trends or share price of individual companies.

The implementation also comes at a time when one research analyst of a foreign-based research entity has reportedly been arrested in connection with a case filed against him and another colleague by an Indian company about which they had published a research report in 2012.
Under the new norms, every individual or entity desiring to function as a research analyst would need to get registered after meeting the prescribed criteria regarding qualifications, capital adequacy, establishment of internal policies and procedures, firewalls against conflict of interest, sufficient and timely disclosures, among others.

"Any person who makes public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media has to disclose his name, registration status and details of financial interest in the subject company and he shall comply with the provisions of regulations..." the market regulator said.

Sebi also said the registration and allied work pertaining to research analysts would be handled by the office of the market regulator.
Accordingly, all the persons seeking registration as Research Analyst have to file their application with Sebi, the regulator said in a statement.
The regulations also provide for penal actions that Sebi can take against erring research analysts. Such actions would include cancellation of registration, debarment, or penalties similar to any other market intermediary.
However, registered Investment Advisers, Credit Rating Agencies, Portfolio Managers, Asset Management Companies, fund managers of Alternative Investment Funds or Venture Capital Funds would not be required to be registered under these regulations.

With regard to foreign entities, Sebi has decided that they have to enter into an arrangement with registered research analysts.