Description

SEBI provides clarifications on research analyst regulations including NISM certification requirements and client consent provisions.

Summary

SEBI has issued comprehensive FAQs to clarify regulatory provisions for Research Analysts following the Third Amendment Regulations 2024. The circular addresses compliance queries and introduces two key relaxations: extending the timeline for NISM certification to one year and exempting institutional investors from mandatory signature consent requirements while still requiring disclosure of terms and conditions.

Key Points

  • FAQs issued after public consultation to address Research Analyst compliance queries
  • Based on SEBI (Research Analysts) (Third Amendment) Regulations, 2024 notified on December 16, 2024
  • Two major compliance changes announced for ease of implementation
  • Individual research analysts employed by research entities do not need separate SEBI registration
  • Research entities employing individual analysts are required to obtain registration

Regulatory Changes

  • NISM Certification Timeline: Persons associated with research services now have one year from the circular date to obtain relevant NISM certification (previously shorter timeline)
  • Institutional Client Consent: Mandatory signature consent on terms and conditions (including MITC) no longer required for institutional investors and qualified institutional buyers
  • Disclosure Requirement: Research entities must still disclose terms and conditions including Most Important Terms and Conditions (MITC) to institutional clients, even without signature requirement

Compliance Requirements

  • Research Analysts and research entities must ensure persons associated with research services obtain NISM certification within one year
  • For institutional investors/qualified institutional buyers: disclosure of research service terms and conditions required but signature consent not mandatory
  • For retail clients: existing signature consent requirements on terms and conditions remain unchanged
  • Research entities (not individual analysts) must maintain SEBI registration when employing research analysts

Important Dates

  • Circular Date: July 23, 2025
  • NISM Certification Deadline: One year from July 23, 2025 (July 23, 2026)
  • Reference Regulation: SEBI (Research Analysts) (Third Amendment) Regulations, 2024 (December 16, 2024)
  • Related Circular: January 08, 2025 guidelines for research analysts

Impact Assessment

The circular primarily eases compliance burden rather than imposing new restrictions. The extended NISM certification timeline provides research entities more flexibility for staff compliance. The exemption from mandatory signature consent for institutional clients reduces administrative overhead while maintaining transparency through required disclosures. These changes acknowledge the sophisticated nature of institutional investors while maintaining investor protection standards for retail clients. Overall impact is positive for research entities serving institutional markets.

Impact Justification

Provides important regulatory clarifications but doesn't introduce major new requirements - mostly eases compliance burden for institutional client interactions