Description
SEBI permits Research Analysts to communicate certified past performance to clients through one-to-one communication, specifying performance metrics and mandatory disclosure requirements.
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 in one-to-one communication. BSE has outlined seven performance metrics that RAs may use, along with mandatory accompanying information and transparency requirements.
Key Points
- Research Analysts can communicate certified past performance to clients and 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)
- RAs may select one or more performance metrics from the provided list; disclosure of all metrics is not mandatory
- RAs must adopt a single, consistent performance calculation methodology for each category of advice or recommendation
- All performance communications must include six mandatory accompanying information items
Performance Metrics Available
Seven performance metrics are specified:
- Absolute Returns (INR terms) - Returns generated in INR for a particular time period for an assumed investment amount
- Absolute Returns (%) - Returns generated in percentage terms for a particular time period
- CAGR - Compounded average annual growth rate over a specified period
- Rolling Returns - Returns over overlapping time periods within a total timeframe
- Hits/Misses - Can be represented as:
- Ratio of successful to unsuccessful calls
- Ratio of successful calls to total calls
- Number of successful calls as percentage of total calls
- Performance Charts - Performance represented with NAV or price of recommended/advised securities
- Range of Returns Generated - Can be represented as:
- Maximum and minimum returns across all recommendations in a time period
- Categorization of recommendations across different performance ranges
Compliance Requirements
Mandatory Information to Accompany Performance Communications:
- Name/nature of service/advice/recommendation of RA to whom the performance relates
- Applicable time period for the performance
- Information/details to help users understand how performance has been calculated
- Assumptions made during performance calculation
- Disclaimers specified in the SEBI circular
- Certification provided by the member of ICAI/ICMAI for past performance data
Additional Requirements:
- Research Analysts must maintain consistency by adopting a single performance calculation methodology at all times for each category of advice or recommendation
- Enhanced transparency and uniformity in performance reporting
Important Dates
- October 30, 2025 - Date of SEBI Circular no. HO/38/12/11(1)2025-MIRSD-POD/I/73/2025
- November 21, 2025 - Date of BSE circular providing performance metric details
Impact Assessment
Industry Impact:
- Standardizes performance communication practices across Research Analysts
- Provides flexibility by allowing RAs to choose relevant metrics rather than mandating all seven
- Increases transparency and client awareness of RA track records
Operational Impact:
- Research Analysts need to engage ICAI/ICMAI members for performance certification
- RAs must establish and document consistent performance calculation methodologies
- Systems and processes required to maintain mandatory accompanying information
Market Impact:
- Expected to enhance investor confidence through certified performance disclosure
- May influence client decision-making in selecting Research Analysts
- Promotes professionalism and accountability in research analyst services
Impact Justification
Establishes standardized framework for Research Analysts to communicate past performance to clients, affecting RA industry practices but not directly impacting trading or market operations