The Securities Exchange Board of India (“SEBI”) has released updated Master Circulars for Investment Advisers (“IAs”) and Research Analysts (“RAs”) on May 21, 2024 (“Master Circulars”).

The Master Circulars stated that an Indian stock exchange adhering to the criteria laid down by SEBI be recognised as the Investment Adviser Administration and Supervisory Body (“IAASB”) and Research Analyst Administration and Supervisory Body (“RAASB”) to oversee the application for registration and post registration activities of Investment Advisers (“IA”) and Research Analysts (“RA”) with effect from July 25, 2024 (“Date of Operationalisation”). In order to ensure efficiency in the system and economies of scale, the RAASB and the IAASB will now have to be the same stock exchange, with which IAs and RAs will be “enlisted”.

This update comes in the backdrop of the amendment of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (“SECC Regulations”), which stated that a recognised stock exchange may undertake the activities of administration and supervision over specified intermediaries on such terms and conditions and to such an extent as may be specified by SEBI.

The core functions relating to the registration, enforcement action, and disciplinary or penal action will remain with SEBI. SEBI will continue to register IAs and RAs as per the mandate under the SEBI Act, 1992. SEBI and RAASB or IAASB, as the case may be, will concurrently perform the following functions as specified in the following table:

Listed below are SEBI’s guidelines to provide ease of doing business in India, ensure smooth operationalisation of the RAASB and IAASB frameworks, and prevent disruption for existing RAs and IAs.

• Existing RAs and IAs registered with SEBI, who are also members of BASL, shall be deemed to be enlisted with the newly appointed IAASB and RAASB.
• SEBI shall continue to process applications for registration as RA received and under process with SEBI up to the effective Date of Operationalisation of the RAASB framework, as given in the Master Circular. Once SEBI grants registration, such RAs shall be deemed to be enlisted with the new RAASB.
• SEBI/BASL shall continue to process applications for registration as IA pending with SEBI/BASL up to the effective Date of Operationalisation of IAASB framework, as given in the Master Circular. Once SEBI/BASL grants registration, such IAs shall be deemed to be enlisted with the new IAASB.
• New applications received from the effective Date of Operationalisation of RAASB/IAASB framework, as given in this Master Circulars, shall be routed through the new RAASB/IAASB. In such cases, enlistment with RAASB/IAASB shall be a pre-requisite for the grant of certificate of registration to RA/IA by SEBI.

• Registered IAs, RAs, and applicants pending registration certificate will not be required to submit any new documentation to the IAASB or RAASB for enlistment.

It is interesting to note that the same recognised stock exchange will be both IAASB and RAASB. It is also pertinent that the SEBI Master Circular on Online Dispute Resolution dated December 28, 2023, put the onus of establishing the ODR portal and overseeing its functions on stock exchanges too.

Given the foregoing, it can be concluded that SEBI is trying to harmonise and streamline the regulations applicable to IAs and RAs under one entity and further assign to recognised stock exchanges a heightened degree of responsibility for overseeing and regulating the functions of securities market participants and intermediaries.