SEBI Update - Guidelines for Research Analysts

The Securities and Exchange Board of India (SEBI) has taken a significant step towards refining the operational framework for Research Analysts (RAs) by issuing new guidelines. These updates, which came into effect on December 16, 2024, aim to enhance transparency, accountability, and professionalism in research services.

Qualification and Certification Requirements

The revised guidelines clarify that the updated qualification standards apply to new RAs and non-individual research entities. Existing professionals, including principal officers and partners already engaged in research services, are exempt from this mandate. However, partnership firms lacking the prescribed qualifications must transition to a Limited Liability Partnership (LLP) or corporate structure by September 30, 2025.

Compliance Officer Appointment

Non-individual RAs are required to appoint an independent compliance officer who is a member of professional bodies like ICAI, ICSI, or ICMAI and holds certifications in relevant NISM exams. This ensures rigorous adherence to SEBI regulations. Use of Artificial Intelligence in Research

SEBI emphasizes that RAs leveraging Artificial Intelligence (AI) tools must ensure data security, confidentiality, and integrity. Clients must be informed about the extent of AI usage, starting from the service onboarding stage. Existing clients must receive this disclosure by April 30, 2025. Fee Structure and Limits

To ensure fairness, SEBI has capped the annual fee chargeable to individual and Hindu Undivided Family (HUF) clients at ₹1,51,000. This limit excludes statutory charges and will be reviewed every three years based on the Cost Inflation Index (CII). Provisions for advance payments and refunds in case of premature service termination are also detailed, ensuring client-friendly practices. Segregation of Research and Distribution Activities

To avoid conflicts of interest, RAs must segregate research and distribution activities at the client level. Existing clients must choose between these services within the RA’s group or family structure, while new clients will have this option at onboarding. Compliance with this guideline is mandated by June 30, 2025. Model Portfolio Recommendations

For RAs offering model portfolios, SEBI has introduced a structured framework to standardize practices. Compliance with these guidelines and audit requirements is expected by June 30, 2025. Disclos