Description

SEBI permits Research Analysts to communicate certified past performance to clients using specified performance metrics with mandatory disclosures and consistent methodology.

Summary

SEBI Circular no. HO/38/12/11(1)2025-MIRSD-POD/I/73/2025 dated October 30, 2025 permits Research Analysts (RAs) to communicate their past performance certified by ICAI/ICMAI members to clients and prospective clients in one-to-one communication. BSE has specified seven performance metrics that RAs may use, along with mandatory accompanying information and disclosure requirements. RAs must adopt a single, consistent performance calculation methodology for each category of advice or recommendation.

Key Points

  • Research Analysts can communicate certified past performance to clients in one-to-one communication
  • Performance data must be certified by a member of ICAI (Institute of Chartered Accountants of India) or ICMAI (Institute of Cost Accountants of India)
  • RAs may select one or more performance metrics from the specified list; disclosure of all metrics is not mandatory
  • Seven performance metrics are available: Absolute Returns (INR and %), CAGR, Rolling Returns, Hits/Misses, Performance Charts, and Range of Returns
  • Research Analysts must adopt a single, consistent performance calculation methodology at all times for each category of advice or recommendation

Regulatory Changes

SEBI has introduced a framework allowing Research Analysts to share certified past performance data with clients. This circular implements SEBI Circular dated October 30, 2025, providing standardized performance metrics and disclosure requirements to ensure transparency and uniformity in performance communication.

Compliance Requirements

Performance Metrics Available (RAs may select one or more):

  1. Absolute Returns (INR terms) - Returns generated in INR for a particular time period for an assumed investment amount
  2. Absolute Returns (%) - Returns generated in percentage terms for a particular time period
  3. CAGR - Compounded average annual growth rate over a specified period
  4. Rolling Returns - Returns over overlapping time periods within a total timeframe
  5. Hits/Misses - Ratio of successful to unsuccessful calls, or successful calls as percentage of total calls
  6. Performance Charts - Charts showing NAV or price of recommended securities with date information
  7. Range of Returns - Maximum and minimum returns across all recommendations, or categorization of recommendations across performance ranges

Mandatory Accompanying Information:

  • Name/nature of service/advice/recommendation of RA
  • Applicable time period for the performance
  • Information/details explaining how performance was calculated
  • Assumptions made during performance calculation
  • Disclaimers specified in SEBI circular
  • Certification provided by ICAI/ICMAI member for past performance data

Additional Requirements:

  • RAs must adopt a single, consistent performance calculation methodology at all times for each category of advice or recommendation
  • Communication limited to one-to-one interactions with clients and prospective clients

Important Dates

  • SEBI Circular Date: October 30, 2025
  • BSE Circular Date: November 21, 2025
  • No specific implementation deadline mentioned; effective immediately

Impact Assessment

For Research Analysts:

  • Provides standardized framework for communicating track record to clients
  • Requires certification process through ICAI/ICMAI members
  • Mandates consistent methodology adoption for performance calculation
  • Allows flexibility in choosing which metrics to disclose

For Clients:

  • Enhanced transparency in understanding RA performance history
  • Standardized metrics facilitate comparison across different RAs
  • Access to certified performance data for informed decision-making

Market Impact:

  • Improves accountability and transparency in research analyst services
  • May increase competition among RAs based on verifiable performance metrics
  • Limited to one-to-one communication, not public disclosure
  • Low immediate market disruption as implementation is voluntary within specified framework

Impact Justification

Establishes standardized framework for Research Analysts to communicate past performance, affecting transparency and client communication practices but limited to RA-client interactions