Description

SEBI allows Investment Advisers and Research Analysts to use liquid mutual funds and overnight mutual funds as alternatives to bank deposits for regulatory compliance.

Summary

SEBI has allowed Investment Advisers (IAs) and Research Analysts (RAs) to use liquid mutual funds and overnight mutual funds as alternatives to bank deposits for meeting regulatory deposit requirements under regulation 8 of respective regulations. This follows industry representations and public consultation, with SEBI Board approval in June 2025.

Key Points

  • IAs and RAs can now use liquid mutual funds or overnight mutual funds instead of bank deposits
  • Deposits must still be marked as lien in favour of IAASB or RAASB (BSE Limited)
  • Amendment regulations were notified on August 06-07, 2025
  • Provides flexibility while maintaining regulatory safeguards
  • BSE Limited directed to implement necessary systems and procedures

Regulatory Changes

  • SEBI (Research Analysts) (Amendment) Regulations, 2025 notified on August 06, 2025
  • SEBI (Investment Advisers) (Amendment) Regulations, 2025 notified on August 07, 2025
  • Modified regulation 8 requirements to include mutual fund units as acceptable deposit forms

Compliance Requirements

  • IAs and RAs must maintain deposits in one of three forms: liquid mutual fund units, overnight mutual fund units, or scheduled bank deposits
  • All deposits must be marked as lien in favour of IAASB or RAASB
  • BSE Limited (IAASB/RAASB) must establish implementation systems and notify registered entities

Important Dates

  • August 12, 2025: Circular effective date
  • September 30, 2025: Compliance deadline for IAs and RAs

Impact Assessment

  • Provides operational flexibility for IAs and RAs in managing regulatory deposits
  • May improve liquidity management and potential returns on required deposits
  • Reduces regulatory burden while maintaining investor protection framework
  • Limited direct market impact as focused on regulatory compliance mechanisms

Impact Justification

Provides regulatory flexibility for IAs and RAs but doesn't significantly change market dynamics