Description

SEBI circular permits Research Analysts to communicate certified past performance to clients with specified performance metrics and mandatory disclosure requirements.

Summary

BSE has issued guidelines on performance metrics for Research Analysts (RAs) to communicate their certified past performance to clients, following SEBI Circular HO/38/12/11(1)2025-MIRSD-POD/I/73/2025 dated October 30, 2025. RAs can now share their past performance certified by ICAI/ICMAI members with clients in one-to-one communication using specified performance metrics.

Key Points

  • Research Analysts permitted to communicate certified past performance to clients (including prospective 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)
  • Seven performance metrics defined for communicating past performance
  • RAs may select one or more metrics from the list; disclosure of all metrics is not mandatory
  • Single, consistent performance calculation methodology must be adopted for each category of advice

Regulatory Changes

SEBI has introduced a structured framework for Research Analysts to communicate their past performance through seven defined performance metrics:

  1. Absolute Returns (INR terms) - Returns generated in INR for assumed investment amount over specified time period
  2. Absolute Returns (%) - Returns in percentage terms for specified time period
  3. CAGR - Compounded average annual growth rate over specified period
  4. Rolling Returns - Returns over overlapping time periods with fixed duration measurements
  5. Hits/Misses - Can be represented as:
    • Ratio of successful to unsuccessful calls
    • Ratio of successful to total calls
    • Number of successful calls as % of total calls
  6. Performance Charts - Charts showing NAV or price of recommended securities with dates
  7. Range of Returns - Maximum & minimum returns across recommendations, or categorization by performance ranges

Compliance Requirements

Mandatory Information Requirements: All performance communications must include:

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

Methodology Requirements:

  • Research Analysts must adopt a single, consistent performance calculation methodology at all times
  • Consistency must be maintained for each category of advice or recommendation
  • Additional information beyond minimum mandatory requirements is permitted

Applicable to:

  • All Research Analysts registered with SEBI
  • Communications to clients and prospective clients

Important Dates

  • SEBI Circular Date: October 30, 2025
  • BSE Circular Date: November 21, 2025
  • Effective Date: Immediate (not specified otherwise)

Impact Assessment

Market Impact: Medium - This circular provides transparency framework for Research Analyst services and enables informed decision-making by investors.

Operational Impact: Research Analysts need to:

  • Establish processes for performance calculation and certification
  • Engage ICAI/ICMAI members for certification of past performance data
  • Develop standardized templates for client communication
  • Ensure consistent methodology application across all communications
  • Maintain documentation of assumptions and calculation methods

Benefits:

  • Enhanced transparency in Research Analyst services
  • Standardized performance communication framework
  • Improved client ability to evaluate RA track record
  • Accountability through third-party certification requirement

Investor Impact: Positive - Investors and clients can now receive certified, standardized performance information to make informed decisions about engaging Research Analysts.

Impact Justification

Important regulatory framework for Research Analysts to communicate past performance but affects only RAs and their clients, not direct market operations or trading