Description

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

Summary

SEBI has amended regulations to allow 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. This change provides greater flexibility while maintaining the same level of regulatory compliance.

Key Points

  • IAs and RAs can now use liquid mutual funds or overnight mutual funds instead of bank deposits
  • Deposits must still be marked as lien in favour of IAASB or RAASB
  • Amendment regulations were notified on August 06 and August 07, 2025
  • Decision based on industry representations and public consultation
  • Approved by SEBI Board in June 2025 meeting

Regulatory Changes

  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 06, 2025
  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 07, 2025
  • Amendment to regulation 8 of both IA Regulations 2013 and RA Regulations 2014
  • Maintains lien marking requirement with supervisory bodies

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 favour of IAASB or RAASB as applicable
  • BSE Limited (IAASB/RAASB) must implement necessary systems and procedures
  • Full compliance required by the deadline

Important Dates

  • September 30, 2025: Compliance deadline for all IAs and RAs
  • August 12, 2025: Circular effective date
  • August 06-07, 2025: Amendment regulations notified
  • June 2025: SEBI Board approval

Impact Assessment

  • Operational Impact: Provides IAs and RAs with more flexible investment options for regulatory deposits
  • Financial Impact: Potentially better returns compared to traditional bank deposits while maintaining compliance
  • Market Impact: Limited direct market impact but enhances operational efficiency for regulated entities
  • Implementation: Requires system updates by BSE Limited as supervisory body

Impact Justification

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