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 the Investment Advisers Regulations, 2013 and Research Analysts Regulations, 2014 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 more flexibility in compliance while maintaining the lien marking requirement in favor of IAASB or RAASB.

Key Points

  • Investment Advisers and Research Analysts can now use liquid mutual funds and overnight mutual funds instead of bank deposits
  • Deposits must still be marked as lien in favor of IAASB or RAASB
  • Amendment regulations were notified on August 6-7, 2025
  • Change approved by SEBI Board in June 2025 meeting
  • Based on industry representations and public consultation feedback

Regulatory Changes

  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 7, 2025
  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 6, 2025
  • Modified Regulation 8 of both IA and RA Regulations to include mutual fund options
  • Maintains lien marking requirements for all deposit forms

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 favor of IAASB or RAASB
  • BSE Limited (IAASB/RAASB) must establish necessary systems and procedures
  • Entities must notify IAs and RAs of the new provisions

Important Dates

  • August 6, 2025: SEBI (Research Analysts) (Amendment) Regulations, 2025 notified
  • August 7, 2025: SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified
  • August 12, 2025: Circular issued and provisions effective
  • September 30, 2025: Compliance deadline for all IAs and RAs

Impact Assessment

This regulatory change provides operational flexibility to Investment Advisers and Research Analysts by offering liquid investment options that may generate better returns than traditional bank deposits while maintaining regulatory compliance. The change addresses industry feedback and modernizes deposit requirements, potentially improving cost efficiency for regulated entities while preserving investor protection through maintained lien arrangements.

Impact Justification

Provides compliance flexibility for Investment Advisers and Research Analysts but affects a specific regulated segment