Description

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

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 (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014.

Key Points

  • IAs and RAs can now choose between bank deposits, liquid mutual fund units, or overnight mutual fund units for deposit requirements
  • All deposits must be marked as lien in favour of IAASB (Investment Adviser Administration and Supervisory Body) or RAASB (Research Analyst Administration and Supervisory Body)
  • Amendment regulations were notified on August 06 and August 07, 2025
  • BSE Limited serves as both IAASB and RAASB
  • Decision based on industry representations and public consultation feedback

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 requirements under both IA and RA Regulations to include mutual fund options

Compliance Requirements

  • IAs and RAs must maintain deposits in one of three forms: scheduled bank deposit, liquid mutual fund units, or overnight mutual fund units
  • All deposits must be marked as lien in favour of appropriate supervisory body (IAASB/RAASB)
  • BSE Limited must implement necessary systems and procedures for the new provisions
  • BSE must notify all registered IAs and RAs about the changes

Important Dates

  • August 12, 2025: Circular effective date
  • September 30, 2025: Compliance deadline for IAs and RAs to meet deposit requirements under new provisions

Impact Assessment

  • Operational Impact: Provides greater flexibility to IAs and RAs in managing regulatory deposits, potentially offering better returns than traditional bank deposits
  • Administrative Impact: BSE Limited needs to establish new systems and procedures to handle mutual fund unit liens
  • Industry Impact: Addresses industry concerns about deposit management efficiency and may reduce compliance costs
  • Market Impact: Limited direct market impact but enhances regulatory framework flexibility for financial intermediaries

Impact Justification

Regulatory change provides operational flexibility to Investment Advisers and Research Analysts but has limited broader market impact