Sebi Registered Research analyst needs to follow the proper compliance and have to get the compliance audit annually. As per the consultation paper issued by the Sebi from time to time, we recommend getting the audit done within 3 months from the end of the Financial year which means for the year 2020-2021, we recommend getting the audit done up to 30 June 2021.
As per the Research analyst Regulation 2014, We need to follow the compliance, starting from regulation 07 to Regulation 26.
Regulation 7- Talks about Education And NISM Certification Requirements :
NISM Certificate validity is 3 Years, so make sure you have a Valid Certificate all the time.
Regulation 8 – Talks About Capital Adequacy- Net Worth Certified By CA/CS
Individual/Proprietorship- Rs 1,00,000/- Required
Private /Limited Company- Rs 25,00,000/- Required
Make sure you maintain a Capital Adequacy of Rs 1,00,000/- or Rs 25,00,000/- as the case may be ( All the time, till you have the certificate )
Regulation 13- Talks about Condition of Certificate
· Research analyst should abide by the provision of the act and these regulations.
· Any material change in the information included in FORM A ( At the time of registration ) should be informed to SEBI in writing. For example – Changes like the appointment of any Employee or associate. Change in Address, Change in Communication
· Research analyst must use the term “ Research analyst” while communicating with his clients.
Regulation 15- Internal Policy and Procedures
Research analysts should have Internal policy and procedures to address any conflict of interest between its research analyst activities and other activities.
Regulation 16- Limitations on Trading
SEBI Always keep an eye on your personal trading activities and trading by your employee. To avoid this, you must not trade on the stocks in which you are providing your research report. For the Research analyst registration process, check this blog.
Regulation 18- Limitation on publication of Research Report
· Do Not Publish a Research report on the company for which you acted as a manager or co-manager, within 40 days in the case of IPO and within 10 Days in case of FPO
· Do Not Publish a Research report on the company for which you participated as an underwriter, within 25 days from the date of the offer.
· Must keep documentary evidence and proper research report for preparing a research report. For a sample research report mail us on firstname.lastname@example.org
Regulation 19- Disclosure in Research Report
You are required to make disclosure like shares you are recommending are in your personal holding or in your family. Whether you have received any compensation/Brokerage from the subject company in the last 12 months.
Regulation 20- Contents of Research Report
· Research analyst must take steps to ensure that facts in its research report are based on reliable information
· If a research report contains either a rating or price target for subject company’s securities and the research analyst or research entity has assigned a rating or price target to the securities for at least one year, such research report shall also provide the graph of the daily closing price of such securities for the period assigned or for a three-year period, whichever is shorter.
Regulation 24 – General Responsibility
These are general responsibility which we already cover in the above regulations like
· Maintaining arm length relationship between its research activity and other activities.
· Should abide by the act
· Certification and qualification all the time given in regulation 7
Regulation 25 – Maintenance of Records
(1) Research analyst or research entity shall maintain the following records:
(i) research report duly signed and dated;
(ii) research recommendation provided;
(iii) the rationale for arriving at research recommendation;
(iv)record of public appearance.
(2) All records shall be maintained either in physical or electronic form and preserved for a minimum period of five years: Provided that where records are required to be duly signed and are maintained in electronic form, such records shall be digitally signed.
(3) Research analyst or research entity shall conduct an annual audit in respect of compliance with these regulations from a member of the Institute of Chartered Accountants of India or Institute of Company Secretaries of India.
Regulation 26- Appointment of Compliance Officer :
If you are a corporate or LLP Than you need to appoint a compliance officer.