SEBI, the capital markets regulator, recently released a framework for the administration and supervision of research analysts (RAs) and investment advisers (IAs) through recognized stock exchanges. This move aims to enhance oversight and regulatory compliance within the financial markets.
New Supervisory Bodies:
SEBI’s notification on April 26 allows recognized stock exchanges to act as administrative and supervisory bodies for RAs and IAs. These entities will be known as Research Analyst Administration and Supervisory Body (RAASB) and Investment Adviser Administration and Supervisory Body (IAASB) respectively.
Core Functions Retained by SEBI:
While stock exchanges take on administrative and supervisory roles, SEBI retains core functions such as registration, enforcement actions, and disciplinary measures concerning RAs and IAs. SEBI’s authority under the Securities and Exchange Board of India Act, 1992, remains unchanged regarding registration processes.
Criteria for Recognition:
To qualify as an RAASB or IAASB, a recognized stock exchange must have a minimum of 15 years of existence, a net worth of at least Rs 200 crore, and nationwide terminals. These criteria ensure the stability, financial strength, and reach necessary for effective supervision and administration.
Transition for Existing Registrants:
Existing RAs registered with SEBI will automatically be considered enlisted with RAASBs, simplifying the transition process. Similarly, existing IAs registered with SEBI and members of BASL (Bombay Association of Stockbrokers and Licensed Agents) will be deemed enlisted with IAASBs recognized under the new framework.
Objectives of the Framework:
The framework aims to streamline supervision, enhance compliance standards, and strengthen investor protection measures within the financial advisory and research sectors. By leveraging the expertise and infrastructure of recognized stock exchanges, SEBI seeks to improve market integrity and transparency.
Impact on Market Participants:
For research analysts and investment advisers, this framework signifies a shift in oversight mechanisms towards more specialized supervisory bodies. It emphasizes adherence to regulatory standards, ethical practices, and professional conduct, which ultimately benefit investors by ensuring reliable and credible financial advice.
Conclusion:
SEBI’s introduction of a framework for the supervision of research analysts and investment advisers through recognized stock exchanges marks a strategic step towards robust regulatory oversight in India’s financial markets. By delegating administrative and supervisory responsibilities while retaining core regulatory functions, SEBI aims to foster a compliant, transparent, and investor-friendly environment. Market participants are expected to adapt to these changes, which are designed to elevate industry standards and promote trust and confidence among stakeholders.
Last modified: May 10, 2024
