The Securities and Exchange Board of India (SEBI), the regulator for the securities market in India, has announced a significant step to enhance the regulatory framework governing investment advisers (IAs) and research analysts (RAs). Effective from July 25, 2024, SEBI has designated BSE Ltd as the supervisory body responsible for the administration and supervision of these professionals. This recognition is for a period of five years and marks a crucial development in the oversight of financial advisors and analysts in India.

Role of BSE as Supervisory Body:

BSE, one of India's leading stock exchanges, will now take on the responsibility of formulating by-laws and issuing guidelines to ensure a seamless transition and adoption of the new framework by research analysts and investment advisors. The designated roles are categorized under two frameworks:

Research Analyst Administration and Supervisory Body (RAASB)

Investment Adviser Administration and Supervisory Body (IAASB)

To facilitate this transition, BSE will be issuing circulars, standard operating procedures (SOPs), and frequently asked questions (FAQs). These documents will provide comprehensive guidance to research analysts and investment advisers, ensuring they understand and comply with the new regulatory requirements.

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Key Provisions of SEBI’s Circular:

SEBI's circular, dated July 12, 2024, outlines several key provisions that RAs and IAs need to be aware of:

Administrative Fees: Applicants seeking renewal as research analysts and investment advisors will be required to pay administrative fees as specified by RAASB/IAASB. This fee structure aims to cover the costs associated with the supervision and administration of these roles.

Revised Fees: The fees payable to SEBI by research analysts seeking registration have been revised. These changes will come into effect from July 25, 2024. Importantly, the total fees payable by an applicant, including application, registration, renewal to SEBI, and administrative fees to RAASB, will not exceed the previous fee structure.

Registration Fees: For applications received before July 25, 2024, the registration fee will be processed according to the erstwhile fee structure. This ensures a smooth transition for those already in the pipeline for registration.

Continuity of Existing Terms: The terms and conditions specified in SEBI’s earlier circular dated May 2, 2024, will continue to apply. This ensures continuity and stability in the regulatory environment for RAs and IAs.

Impact on Research Analysts and Investment Advisers:

The new supervisory framework aims to enhance the regulatory oversight of research analysts and investment advisers. By designating BSE as the supervisory body, SEBI intends to streamline the administration process, making it more efficient and effective. Research analysts and investment advisers will now have a clear set of guidelines and procedures to follow, ensuring they comply with the regulatory requirements.

SEBI’s Warning to Unregistered Advisors:

In a parallel development, SEBI has issued warning letters to unregistered investment advisors. This move comes in response to a significant increase in unregistered advisory activities. SEBI has taken a stern stance on this issue, warning these advisors to cease their activities immediately or face regulatory action. This highlights SEBI's commitment to maintaining a fair and transparent market environment, where all participants adhere to the regulatory framework.

Implementation and Monitoring:

BSE will play a crucial role in monitoring the compliance of research analysts and investment advisers with the new regulations. The exchange will track the progress of these professionals and ensure they adhere to the guidelines issued. This proactive approach is expected to enhance the overall quality and reliability of financial advisory services in India.

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Conclusion:

The designation of BSE as the supervisory body for investment advisers and research analysts marks a significant milestone in the regulatory landscape of India's financial markets. This move by SEBI underscores the importance of robust regulatory oversight in maintaining market integrity and protecting investors. As BSE takes on this new role, research analysts and investment advisers will need to familiarize themselves with the updated guidelines and procedures to ensure compliance. The changes in fee structures and the issuance of comprehensive guidelines are steps in the right direction, aimed at fostering a more transparent and accountable financial advisory ecosystem in India.

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