Monday, 25 May 2015

SEBI Regulations

SEBI regulations 2014 comes in to force from today: SEBI (Research Analysts) Regulations, 2014 (“RA Regulations”) were notified in September 2014 and have come into effect from 1st December 2014. These regulations have been introduced to root out any foul play by the research entities analysts or individuals arising out of any conflict of interests.
As per these norms, no person shall act as research analyst or research entity or hold itself out as research analyst unless he has obtained a certificate of registration from SEBI under these regulations unless an exemption specifically applies. Proxy advisory firms, which do not provide buy and sell recommendations, are also required to register with the regulator.
This regulation not only requires registration of qualified individuals, but also prescribes the code of conduct of research analysts and entities. Strict requirements have been put in place for the minimum educational qualifications of the research analysts as well as the minimum capital adequacy requirement. The research analyst also needs to ensure that they obtain a NISM certification for research analysts as specified by the Board or other certification recognized by the Board from time to time.
Besides personal trading under these norms shall be monitored and has to be recorded as per the provisions and wherever required needs formal approval process. The research entity shall not pay any bonus, salary or compensation to the research analysts that are based on merchant banking, investment banking or brokerage service transactions.
Any person who makes public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media has to disclose his name, registration status and details of financial interest in the subject company and he shall comply with the provisions of the regulations. The regulations 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.
However, registered 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.
With regard to foreign entities, SEBI has decided that they have to enter into an arrangement with registered research analysts.

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