WHAT IS THE RESEARCH ANALYST UNDER SEBI AND ITS REGISTRATION CRITERIA ?

RESEARCH ANALYST UNDER SEBI:

A lot of investors invest in stock markets through direct stocks or through mutual funds. However, researching a company or a stock or a commodity is not easy due to a variety of information available from different sources. Sometimes the information is raw and needs to be analysed using various financial tools to be able to make an investment decision. That is where a ‘Research Analyst’ comes into picture.

In short, a research analyst analyses a security including a stock or a mutual fund or a commodity and gives buy or sell or hold recommendation.

However, the views or recommendations of research analysts may not be independent and hence there could be potential conflict of interest.

To tackle this conflict and to ensure independence of research analysts, the regulator felt the need to regulate the activities of research analyst. Hence, SEBI introduced the SEBI (Research Analyst) Regulations, 2014.

It regulates individuals or entities whose business activity is issuance and publication of research reports or research analysis on securities.

Let’s start.

WHAT IS A RESEARCH ANALYST ?

A research analyst is a person who is primarily responsible for preparation of the research report or making ‘buy/sell/hold’ recommendation or give price target or offer an opinion concerning public offer with respect to securities that are listed or to be listed in a stock exchange, like stocks. The analyst may or may not have the designation of ‘research analyst’.

The definition also includes-

1. Entities like a Company or a Limited Liability partnership (LLP) which issue research report of research analysis on listed securities like stocks, mutual funds etc.
2. Any person who reports directly or indirectly to such a research analyst in connection with preparation or publication of research report. E.g. a person who is assisting a research analyst to gather information about a particular stock or mutual fund.

We should also look at the definition of a proxy adviser.

A proxy adviser is a person who advises an institutional investor or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items in a meeting.

What is the eligibility criteria for a research analyst?

Once you are sure of the activity you will be doing and want to register yourself as a Research Analyst, you should check the following two eligibility criteria:

THE QUALIFICATION AND CERTIFICATION REQUIREMENTS:

Qualification:

First, you should have a professional qualification or a post graduate degree or post graduate diploma in finance, business management, commerce, economics, capital markets, financial services, from a university or an institution recognized by the central government or any state government or a recognised foreign university or institution or association

OR

professional qualification or post-graduate degree or post graduate diploma which is accredited by All Indian Council for Technical Education, National Assessment and Accreditation Council or National Board of Accreditation or any other council/board/body set up under an Act of Parliament in India for the purpose;

OR

A graduate in any discipline with working experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.

Certification:

Second, you should have a NISM certification for research analysts as specified by the Board or other certification recognized by the Board from time to time.

So, for example, if you have M.Com. degree and you take up the NISM examination, you fulfil the qualification and certification requirement.

But, if you have an engineering degree and do not have any working experience with a research firm, you do not fulfil the qualification requirements.

In case of non-individuals:

In case of a Company or LLP, the representatives and the partners, respectively, have to fulfil the criteria.

So, if a Director of a Company is not the person who is going to offer the investment advice, he need not fulfil the eligibility criteria.

THE CAPITAL ADEQUACY REQUIREMENT:

This refers to net worth, applicable to proprietors and partnership firms. The net worth, in the form of net tangible assets, should not be less than Rs 1 lac.

In case of non-individuals:

Body corporate such as a company or an LLP shall have the net worth of not less than Rs. 25 lacs. The net worth definition is given in the regulations.

In case the net worth of the company is below the requirement, the company can increase its paid-up capital. In case of LLP, the partners need to bring in more contribution.

The applicant has to get the net worth / net tangible assets certificate from a Chartered Accountant.

FEES FOR REGISTRATION

Application fees has to be paid along with the application form. Application fees is non-refundable.

Once SEBI approves the application, you have to pay the registration fees.

Below is the current schedule for fees:

The application shall be accompanied by a non-refundable application fee as detailed

below-

• For individuals or partnership firms: INR 5000;
• For proxy advisory firms: INR 5000;
• For Body Corporate including Limited Liability Partnerships: INR 50000.

The Board on being satisfied that the applicant complies with the requirements shall send intimation to the applicant and on receipt of the payment of registration fees as detailed below-

• For individuals or partnership firms: INR 10,000;
• For proxy advisory firms: INR 10,000;
• For Body Corporate including Limited Liability Partnerships: INR 5,00,000/-

After you submit the additional information, if any, SEBI will send a communication that the application is approved and you are required to pay registration fees.

On payment of registration fees, SEBI will issue a certificate in your name which will be valid for till the certificate is suspended by SEBI Board. So, SEBI has granted permanent license to RAs.

So, here are the steps in brief:

1. Check the eligibility criteria – qualification, certification and net worth.
2. Prepare the documents and the details required in the application form
3. Pay the application fees
4. Fill the details in the form
5. Communication by SEBI for further information
6. Submit the additional information
7. Communication by SEBI that the application is approved
8. Pay registration fees
9. Issue of certificate by SEBI.

The place of rendering services generally shall be your office or our office situated at :

Br. No.01: Office No. 106, Sr No. 55, Sukhniwas, 15th August Chowk, Mangalwar Peth, Pune – 411011, Maharashtra, India. Br. No. 02:  496B,2nd Floor, Near KCC Classes, Kasba Peth, Pune-411011

Pramodkumar R. Ladda
Company Secretary & Insolvency Professional
Tel: +91-20-24570055 | Office Cell : +91- 9284293227, 9309845448, 8080051671 |
Personal Mob. : +91- 7972422151, 9595271145 |

Skype id: pramodladda
info@csladda.com | http;//www.csladda.com