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 amended regulations to allow Investment Advisers (IAs) and Research Analysts (RAs) to maintain their mandatory deposit requirements using liquid mutual funds or overnight mutual funds as an alternative to traditional bank deposits. This change provides greater flexibility in meeting regulatory compliance requirements.

Key Points

  • IAs and RAs can now use liquid mutual funds or overnight mutual funds instead of bank deposits for regulatory compliance
  • Deposits must still be marked as lien in favour of IAASB or RAASB as applicable
  • Amendment regulations were notified on August 06 and August 07, 2025
  • BSE Limited (IAASB/RAASB) must implement necessary systems and procedures
  • Circular issued under SEBI Act 1992 and relevant IA/RA regulations

Regulatory Changes

SEBI has amended both SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014 to expand acceptable forms of deposits beyond scheduled bank deposits to include:

  • Units of liquid mutual funds
  • Units of overnight mutual funds
  • Traditional bank deposits (existing option retained)

Compliance Requirements

  • Investment Advisers and Research Analysts must maintain deposits as specified under regulation 8 of respective regulations
  • Deposits can be maintained in form of liquid mutual fund units, overnight mutual fund units, or bank deposits
  • All deposits must be marked as lien in favour of IAASB or RAASB
  • BSE Limited must establish systems and procedures for implementation
  • Entities must notify IAs and RAs about the new provisions

Important Dates

  • August 06, 2025: SEBI (Research Analysts) (Amendment) Regulations, 2025 notified
  • August 07, 2025: SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified
  • August 12, 2025: Circular issued and effective date
  • September 30, 2025: Compliance deadline for IAs and RAs

Impact Assessment

This regulatory change provides operational flexibility for Investment Advisers and Research Analysts by allowing them to utilize potentially higher-yielding liquid and overnight mutual funds instead of traditional bank deposits. The impact is primarily positive for affected entities as it offers more investment options while maintaining the same level of regulatory protection through lien arrangements.

Impact Justification

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