MUMBAI: Sebi has asked all existing research analysts in the capital markets to register by May 31 to continue providing their services, failing which they will face strict penal action.
Under the new norms, no person or entity can act as research analyst or research entity without obtaining a registration certificate from Sebi.
“All the persons acting as research analysts or research entity before the commencement of the regulation are advised to make an application for grant of registration before May 31, 2015 to continue to do so” Securities and Exchange Board of India (Sebi) said in a statement.
The persons who fails to make an application for grant of registration by month-end would be barred from acting as research analysts.
If any person found to be acting as research analyst after May 31 without obtaining registration, Sebi will initiate ‘appropriate action as deemed fit’.
The Research Analysts Regulations, which came into effect from December 1, 2014, are aimed at safeguarding investors from misleading advice coming from unregulated entities.
Under the regulations, foreign entities acting as research analysts for Indian markets or India-listed companies need to tie-up with a registered entity in India, while domestic players are also be subjected to strict disclosures and scrutiny.
The norms, which also cover ‘proxy’ advisors or those providing advisory services similar to research analysts, were framed in the wake of various instances of ‘mischievous’ research reports getting circulated among the investors to manipulate the overall market trends or share price of individual companies.
Every individual or entity desiring to function as a research analyst would need to get registered after meeting the prescribed criteria regarding qualifications, capital adequacy, establishment of internal policies and procedures, firewalls against conflict of interest, sufficient and timely disclosures, among others.
The regulation also provide for penal actions that Sebi can take against erring research analysts. Such actions would include cancellation of registration, debarment, or penalties similar to any other market intermediary.
The framework register and regulate research analysts as well as those entities that make recommendations related to securities and public offers such as brokerage houses, merchant bankers and proxy advisors.
However, Investment Advisers, Credit Rating Agencies, Portfolio Managers, Asset Management Companies, fund managers of Alternative Investment Funds or Venture Capital Funds would not be required to be registered under these regulations.