Description

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

Summary

SEBI has amended the Investment Advisers and Research Analysts regulations to allow the use of liquid mutual funds and overnight mutual funds as alternatives to traditional bank deposits for meeting regulatory deposit requirements. This change provides greater flexibility in compliance while maintaining investor protection.

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 favour of IAASB or RAASB
  • Amendment regulations were notified on August 6-7, 2025
  • Compliance deadline set for September 30, 2025
  • BSE Limited (as IAASB/RAASB) must implement necessary systems and procedures

Regulatory Changes

  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 6, 2025
  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 7, 2025
  • Modified Regulation 8 requirements for both IA and RA regulations
  • Expanded acceptable forms of deposits beyond scheduled bank deposits

Compliance Requirements

  • Investment Advisers and Research Analysts must maintain deposits in one of three forms:
    • Units of liquid mutual fund
    • Units of overnight mutual fund
    • Traditional bank deposit with scheduled bank
  • All deposits must be marked as lien in favour of appropriate supervisory body
  • BSE Limited must establish systems for implementation and notify affected parties

Important Dates

  • August 12, 2025: Circular effective date
  • September 30, 2025: Compliance deadline for IAs and RAs

Impact Assessment

Positive Impact:

  • Increased flexibility in meeting regulatory requirements
  • Potential for better returns on regulatory deposits through mutual fund investments
  • Reduced operational burden on market participants

Market Impact:

  • Likely to increase demand for liquid and overnight mutual fund schemes
  • May improve liquidity management for Investment Advisers and Research Analysts
  • Maintains regulatory oversight while providing operational flexibility

Impact Justification

Provides additional compliance flexibility for IAs and RAs without changing core regulatory requirements