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 approved the use of liquid mutual funds and overnight mutual funds as alternatives to bank deposits for Investment Advisers (IAs) and Research Analysts (RAs) to meet their regulatory deposit requirements. This change provides operational flexibility while maintaining the same compliance standards under existing regulations.

Key Points

  • Investment Advisers and Research Analysts can now use liquid mutual funds or overnight mutual funds instead of bank deposits
  • The deposit requirement under regulation 8 of IA Regulations 2013 and RA Regulations 2014 remains unchanged
  • Mutual fund units must be marked as lien in favour of IAASB or RAASB (BSE Limited)
  • Amendment regulations were notified on August 06 and August 07, 2025
  • Compliance deadline set for September 30, 2025

Regulatory Changes

  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 06, 2025
  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 07, 2025
  • Expanded acceptable forms of deposits to include mutual fund units alongside traditional bank deposits

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 the respective supervisory body (IAASB or RAASB)
  • BSE Limited (as IAASB/RAASB) must implement necessary systems and procedures
  • Existing deposit amounts and regulatory framework remain unchanged

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 provisions effective
  • September 30, 2025: Compliance deadline for all IAs and RAs

Impact Assessment

  • Positive Impact: Provides operational flexibility and potentially better returns on regulatory deposits for IAs and RAs
  • Administrative Impact: BSE Limited must develop new systems and procedures for managing mutual fund unit liens
  • Market Impact: May increase demand for liquid and overnight mutual fund schemes from regulatory participants
  • Risk Management: Maintains regulatory protection while allowing market-linked deposit options

Impact Justification

Provides operational flexibility to Investment Advisers and Research Analysts for regulatory compliance without changing core requirements