Description

SEBI allows Investment Advisers and Research Analysts to use liquid mutual funds and overnight mutual funds as an alternative to bank deposits for regulatory compliance.

Summary

SEBI has approved allowing Investment Advisers (IAs) and Research Analysts (RAs) to use liquid mutual funds and overnight mutual funds as alternatives to bank deposits for meeting regulatory deposit requirements under SEBI regulations. This change provides more flexibility while maintaining the lien requirement in favor of respective supervisory bodies.

Key Points

  • Investment Advisers and Research Analysts can now use liquid mutual funds or overnight mutual funds instead of bank deposits
  • Deposits must still be marked as lien in favor of IAASB or RAASB as applicable
  • Amendment regulations were notified on August 06 and August 07, 2025
  • Change approved by SEBI Board in June 2025 based on industry representations and public consultation
  • BSE Limited acts as both IAASB and RAASB

Regulatory Changes

  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 06, 2025
  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 07, 2025
  • Modified regulation 8 of both IA Regulations 2013 and RA Regulations 2014

Compliance Requirements

  • IAs and RAs must maintain deposits in one of three forms: liquid mutual fund units, overnight mutual fund units, or scheduled bank deposits
  • All deposits must be marked as lien in favor of IAASB or RAASB
  • BSE Limited must implement necessary systems and procedures
  • Compliance with new deposit requirements mandatory

Important Dates

  • September 30, 2025: Final deadline for IAs and RAs to comply with new deposit requirements
  • Immediate effect: Circular provisions effective from date of issuance (August 12, 2025)

Impact Assessment

Operational Impact: Provides greater flexibility and potentially better returns for IAs and RAs while maintaining regulatory safeguards. May reduce operational costs and improve liquidity management for these entities.

Market Impact: Limited direct market impact as this affects regulatory compliance mechanisms rather than trading or listing operations. Positive for mutual fund industry as it may increase assets under management in liquid and overnight funds.

Impact Justification

Provides operational flexibility to IAs and RAs for deposit compliance but doesn't significantly impact broader market operations