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 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. This change provides operational flexibility while maintaining the lien requirement in favor of supervisory bodies.

Key Points

  • IAs and RAs can now use liquid mutual funds or overnight mutual funds instead of bank deposits
  • Deposits must still be marked as lien in favor of IAASB or RAASB as applicable
  • Amendment regulations were notified on August 6-7, 2025
  • Change based on industry representations and public consultation
  • SEBI Board approved the proposal in June 2025

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 of both IA Regulations 2013 and RA Regulations 2014
  • Expanded acceptable forms of deposits beyond scheduled bank deposits

Compliance Requirements

  • IAs and RAs must maintain deposits in approved forms (bank deposit, liquid mutual fund units, or overnight mutual fund units)
  • All deposits must be marked as lien in favor of IAASB or RAASB
  • BSE Limited (IAASB/RAASB) must implement necessary systems and procedures
  • Entities must notify IAs/RAs of the new provisions

Important Dates

  • September 30, 2025: Compliance deadline for IAs and RAs
  • August 12, 2025: Circular effective date
  • August 6-7, 2025: Amendment regulations notified
  • June 2025: SEBI Board approval

Impact Assessment

This change provides operational flexibility and potentially better returns for IAs and RAs while maintaining regulatory safeguards. It may improve cash management efficiency for regulated entities and demonstrates SEBI’s responsiveness to industry feedback. The impact is primarily operational rather than market-wide, affecting the specific community of registered investment advisers and research analysts.

Impact Justification

Provides operational flexibility for IAs and RAs but affects specific regulated entities rather than broader market