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SEBI has introduced a new framework for stock exchanges to become supervisory bodies to regulate research analysts (RAs) and investment advisors (IAs).
Stock exchanges can become supervisory bodies called Research Analyst Administration and Supervisory Body (RAASB) for regulating RAs and Investment Adviser Administration and Supervisory Body (IAASB) for supervising IAs.
The criteria for recognized stock exchanges to become a regulatory body is as follows-
- Minimum of 15 years of existence as a recognized stock exchange
- Minimum net worth of Rs 200 crore
- Stock exchange should have nationwide terminals, investor grievance redressal mechanism including online dispute solution mechanism
- Service centers in at least 20 cities
Commenting on the circular, Mumbai RIA, Vishal Dhwan of Plan Ahead Wealth Advisors said that earlier RAs were directly regulated by SEBI and didn’t have any supervisory body specifically for them. Later, SEBI allowed BSE Administration and Supervision LTD (BASL) to regulate IAs but a common stock exchange will be doing so for economies of scale as mentioned by SEBI.
Vivek Rege of VR Wealth Advisors, Mumbai also added that SEBI will soon be coming up with the stock exchange responsible for regulating the investment advisors.
In the circular, SEBI also said that once the stock exchange becomes RAASB and IAASB, it has to maintain necessary infrastructure like adequate office space and manpower to effectively discharge the responsibilities.
Additionally, it has to put in place systems for maintaining database of RAs/IAs.
Other function of the supervisory body includes:
- Maintaining an internal committee to oversee the activities of administration and supervision of RAs and IAs
- Monitor the activities of RAs/IAs by obtaining annual compliance audit report and other periodic reports covering general details of RAs/IAs like details of customer complaints and details of clients
- The supervisory body will be responsible for referring to SEBI in case of enforcement action against RAs/IAs
- New RA and IAs will now have to seek registration with the supervisory body
- Existing RAs will be deemed to be enlisted with RAASB and IAs registered with SEBI and BASL will be enlisted with IAASB
- Pending applications for IAs with SEBI and BASL will continue to be processed by SEBI. SEBI will review pending application for IAs with BASL Once registration is done by SEBI, they will be enlisted with the IAASB
SEBI will be monitoring these bodies through periodical reports and inspection regarding administration and supervision of RAs and IAs
This circular becomes effective from July 25, 2024.
