The Securities and Exchange Board of India (Sebi) will be delegating administrative and supervisory responsibilities of research analysts (RAs) and investment advisers (IAs) to a stock exchange, along with many other non-core functions like approval of advertisements and scrutiny of applications.
Once the new norm kicks in, new applications for a research analyst will be routed through the stock exchange, and enlistment with the exchange may be a prerequisite for obtaining Sebi registration, as per draft documents seen by Business Standard.
However, existing RAs will not be required to re-register with the new administrative body, unlike when the transition for investment advisers was done to the present BSE-owned administrative body.
Sebi at its March board meeting had approved recognising a stock exchange as a ‘Research Analyst Administration and Supervisory Body’ (RAASB) and ‘Investment Advisers Administration and Supervisory Body’ (IAASB).
While enforcement action and penal action will still be issued by the market regulator, with the new enabling provisions, the delegated stock exchange may issue warnings or refer a matter for enforcement action.
“The other non-core or incidental functions, as may be specified by Sebi, shall be performed concurrently by Sebi and RAASB. Sebi shall monitor RAASB through periodical reports and inspection regarding the activities of RAs,” said the document.
As the RAASB will be charging administrative fees, the market regulator has decided to take a fee-cut in its regulatory charges so as to keep the transition fee-neutral for RAs and IAs.
For instance, as per the existing fee structure, an individual applicant is required to pay Rs 15,000. In the revised fee structure, the amount payable to Sebi for application and registration will be reduced to only Rs 5,000, while the amount to be paid to RAASB as an administrative fee for five years would be Rs 10,000.
As per data shared by Sebi, there are over 1,176 registered research analysts as of February 2024. The number of RAs has surged manifolds since the RA Regulations first came into existence in December 2014.
At present, BSE Administration and Supervision (BASL), a wholly owned subsidiary of BSE, has been assigned as an IAASB and is responsible for verification and processing of applications for investment advisers, grievance redressal, monitoring their activities, and on-site or off-site supervisions, among others.
However, there is no clarity if BASL will continue to carry these roles, as only one exchange will be delegated as a RAASB or IAASB for the first five years.
First Published: Apr 18 2024 | 6:05 PM IST