Description

SEBI circular permits Research Analysts to communicate certified past performance to clients using standardized performance metrics and calculation methodologies.

Summary

SEBI vide 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 a member of ICAI/ICMAI to their clients (including prospective clients) in one-to-one communication. BSE has outlined seven standardized performance metrics that RAs may select from, along with mandatory disclosure requirements and the requirement to 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
  • Past performance 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 are available for RAs to choose from (selection of all metrics is not mandatory)
  • RAs must adopt a single, consistent performance calculation methodology at all times for each category of advice or recommendation
  • All performance communications must include six mandatory accompanying information items

Regulatory Changes

SEBI has introduced a framework allowing Research Analysts to communicate certified past performance data to clients, which was previously not permitted or regulated in this structured manner. This builds on SEBI Circular no. HO/38/12/11(1)2025-MIRSD-POD/I/73/2025 dated October 30, 2025.

Compliance Requirements

Performance Metrics (RAs may select one or more)

  1. Absolute Returns (in INR terms) - Returns generated in INR terms for a particular time period, for an assumed sum of investment amount; must specify time period

  2. Absolute Returns (in %) - Returns generated in percentage terms for a particular time period; must specify time period

  3. CAGR - Compounded average annual growth rate over a specified period; must specify time period

  4. Rolling Returns - Returns over overlapping time periods within a total timeframe; must specify time period

  5. Hits/Misses - Can be represented as:

    • Ratio of successful calls to unsuccessful calls
    • Ratio of successful calls to total calls
    • Number of successful calls as % of total calls
    • Must specify time period and number of recommendations

  6. Performance Charts with NAV or Price - Performance represented in chart form with NAV or price of recommended/advised securities; must specify date

  7. Range of Returns Generated - Can be represented as:

    • Maximum & minimum returns generated across all recommendations/advice in a particular time period
    • Categorization of number of recommendations/advice across different ranges of performance
    • Must specify time period and number of recommendations

Mandatory Accompanying Information

All performance communications shall be accompanied with:

  1. The name/nature of service/advice/recommendation of RA to whom the performance relates
  2. The applicable time period for the performance
  3. Information/details to help the user understand how the performance has been calculated
  4. Assumptions made during performance calculation
  5. Disclaimers specified in the SEBI circular
  6. Certification provided by the member of ICAI/ICMAI for past performance data

Methodology Requirements

  • Research Analysts shall adopt a single, consistent performance calculation methodology at all times for each category of advice or recommendation
  • This ensures transparency and uniformity in performance reporting

Important Dates

  • October 30, 2025 - Date of original SEBI Circular no. HO/38/12/11(1)2025-MIRSD-POD/I/73/2025
  • November 21, 2025 - Date of BSE circular providing detailed performance metrics framework

Impact Assessment

Market Impact: Medium

This circular affects Research Analysts registered with SEBI who wish to communicate their track record to clients. It provides a standardized framework for performance communication, enhancing transparency in the research analyst industry.

Operational Impact: Medium

Research Analysts will need to:

  • Engage ICAI/ICMAI members to certify their past performance data
  • Establish consistent performance calculation methodologies for each category of advice
  • Prepare performance data in compliance with the specified metrics and disclosure requirements
  • Update client communication processes to include all mandatory accompanying information

Compliance Impact: Medium

The framework is voluntary (RAs are permitted but not required to communicate past performance), but those who choose to do so must strictly adhere to the specified metrics, certification requirements, and disclosure norms. The requirement for consistency in methodology across time periods ensures that performance data cannot be selectively presented in favorable ways.

Impact Justification

Introduces new framework for Research Analysts to communicate certified past performance to clients, affecting operational practices but limited to RA-client communications only