Research Analyst Regulations – Re-Birth

INTRODUCTION

Research Analysts play a very important role as they analyse information on securities and provide recommendations, and investors normally rely on their advice. However, such advice is many times prone to conflicts of interest arising from preparation and dissemination of research reports with vested interest. Such research analysts include independent research analyst, an intermediary that employs any research analyst or research entity that issues any research report.

This led to the need for Research Analyst Regulations way back in 2013 to establish a regulatory framework to ensure impartial reporting, address conflict of interest, improve governance standards, minimise market malpractices, etc. In order to regulate and streamline the activities of individuals and entities offering research analyst (RA) services, The Securities and Exchange Board of India (Research Analysts) Regulations, 2014, were notified on 1st September, 2014. However, every regulation stands the test of time and must be revisited from time to time.

One such instance that required to re-consider the relevance of existing regulatory framework, has been the mismatch in the large investor base vis-à-vis the number of investment advisors (IA) which led to the proliferation of unregistered entities acting as IA’s & RA’s.