Review of regulatory framework for Investment Advisers and Research Analysts

1. Objective

1.1. This memorandum seeks approval of the Board for amendments to the following
regulations and issuance of circular (s) thereunder for simplifying, easing and
reducing the compliance requirements for Investment Advisers (IAs) and
Research analysts (RAs) and bringing in regulatory changes commensurate with
the continually evolving nature of their businesses-

1.1.1. Securities and Exchange Board of India (Investment Advisers)

Regulations, 2013 (hereinafter referred to as ‘IA Regulations’) and

1.1.2. Securities and Exchange Board of India (Research Analysts) Regulations,

2014 (hereinafter referred to as ‘RA Regulations’).

2. Background

2.1. The details of the number of IAs and RAs at the end of the FY 2020-21 to FY
2023-24 are mentioned below:

Type of Number as on
Intermediary
March March 31, March 31, March August
31, 2021 2022 2023 31, 2024 31, 2024

Investment 1334 836* 888* 955* 927*

Advisers

Research 730 825 855 1183 1380

Analysts

* IAs who are registered with SEBI and have also obtained membership of
Investment Adviser Administration and Supervisory Body (IAASB).
2.2. The growth of securities market and technical advancements therein in recent
years has seen considerable increase in domestic investor base. However, the
number of IAs/RAs today is not commensurate with the large investor base. As
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 on August 31, 2024, the number of IAs and RAs are 927 and 1380 respectively,
while the number of investors in the securities market are more than 12 crores.
On the other hand, there is wide proliferation of unregistered entities acting as IAs
and RAs. Thus, it is essential to make the services of IAs and RAs available to
wider number of investors in order to enable them to take informed investment
decision.

2.3. Accordingly, it is imperative to align and put in place a regulatory landscape

conducive and commensurate with the continually evolving nature of business of
IAs and RAs that also simplifies, eases and reduces cost of compliance for IAs
and RAs.

2.4. IA regulations were notified on January 21, 2013 and RA Regulations were
notified on September 01, 2014. Certain amendments to the IA Regulations were
notified on July 03, 2020 with respect to qualifications, net worth, limit on fees to
be charged by IAs, etc. In order to review the regulatory framework for RAs, SEBI
had formed a working group to review the regulatory provisions for RAs in March
2022.

2.5. Subsequently, in the Union Budget for financial year 2023-24, one of the budget
announcements was made as under:

“To simplify, ease and reduce cost of compliance, financial sector regulators will
be requested to carry out a comprehensive review of existing regulations. For this,
they will consider suggestions from public and regulated entities........”

2.6. Pursuant to the above-mentioned budget announcement, the working group

constituted for review of compliance requirements for IAs and RAs, after
considering the suggestions received from public, submitted its report on February
28, 2024.

3. Public consultation:

3.1. SEBI issued a consultation paper on August 06, 2024 (Annexure A) proposing
certain changes in the regulatory framework for IAs and RAs for public comments.
The public comments were invited on the consultation paper till August 26, 2024.
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 The proposals in the consultation paper were based on the recommendations of
the working group on review of regulatory provisions for RAs and the working
group for review of compliance requirements for IAs and RAs, representations
from industry associations and internal deliberations.

3.2. The brief of the proposals in the consultation paper is placed at Annexure B.

4. Analysis of public comments:

4.1. SEBI received 3289 responses from 262 entities/persons which includes various
stakeholders such as intermediaries, industry associations, law firms and
investors. Further, SEBI also held virtual public conferences with (This has been
excised for reasons of confidentiality) in the context of the consultation paper.
The observations in the prominent media articles on the consultation paper were
also noted. The brief summary of the comments received on the consultation
paper is placed at Annexure C.

4.2. 68% of the respondents have agreed that relaxation in the eligibility criteria such
as qualification, certification, experience and net-worth requirements shall help in
the growth of the IA and RA Industry which in turn shall cater to needs of growing
number of investors.

4.3. There are only two proposals where majority of respondents are not in favour of
the proposals. 56% of respondents are not in favour allowing registration as part-
time IA/RA, while 76% respondents are not in favor of the proposed limit on the
fees chargeable by RAs. Majority of respondents have broadly agreed with rest of
the proposals contained in the consultation paper.

4.4. The proposals in the consultation paper and the summary of public comments
received thereon were also discussed by the Intermediary Advisory Committee
(IAC) in its meeting held on September 04, 2024. The recommendations of IAC
are also suitably incorporated in the proposals.

4.5. Out of the 24 proposals in the consultation paper that are being considered in this
memorandum, except the two proposals, majority of the respondents are in favor
of rest of the 22 proposals. With respect to the two proposals where majority of
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public comments are not in favour, changes have been made to one proposal i.e.
fee chargeable by RAs and IAs based on the concerns/suggestions of public and
wider deliberations within IAC. In another proposal i.e. to allow registration as part-
time IAs/RAs, the rationale provided by majority of the public comments does not
serve the interest of investors and hence the proposal has been retained. Certain
changes have been made to three other proposals, based on the suggestions in
public comments, industry representations and IAC recommendations. The
comments/suggestions on these proposals are discussed below in detail:

4.5.1. Relaxation in the eligibility criteria for registration as IAs and RAs

i. Risk of Dilution in Standards: Majority of the public comments (127 out

of 186) have supported the proposals for relaxation in the eligibility criteria.
However, some of the respondents have raised concerns that relaxation in
the eligibility requirement such as qualification and experience may lead to
a dilution of standards, possibly resulting in lower quality of advice and
research recommendations. There is a need to balance ease of entry with
maintaining rigorous standards to protect investor interests.

ii. Analysis: The objective of the educational qualification is to assess the

orientation of the applicant towards the subject. The proposed minimum
requirement of graduate degree in the specified field such as finance,
accountancy, business management etc. addresses the concerns related
to primary orientation of the applicants in the relevant fields. Over and
above this, an applicant, for registration as IA, is required to obtain the
subject specific certifications- NISM-Series-XA and XB which cover the
domain specific topics pertaining to IA industry in a comprehensive manner
and are widely considered across industry as rigorous requirement for
getting registration as IA. For the FY 2023-24, the pass percentage of
NISM-Series-XA is only 26% which is lower than any other NISM
certification examination.

Similar rigour is proposed to be brought in the NISM certification exam for

Research Analysts to make the certification more comprehensive so as to

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 impart the necessary knowledge and skills for the applicants seeking
registration as RAs.

There have been other representations to also recognise other educational

qualifications such as Chartered Market Technician. To enable this SEBI
will have to evaluate the orientation and parity of the educational
qualification. On a representation, SEBI shall after seeking inputs of NISM,
notify such educational qualifications as eligible from time to time.

Given the above, the concerns have been addressed by having a balance
between the minimum qualification requirement essential for the primary
orientation and industry specific comprehensive NISM certification
requirements, the proposal for relaxation of the educational qualifications
is recommended for approval of the Board.

4.5.2. Registration as Part-time IA and RA

i. Decreased service quality: Out of total 145 comments received on this

proposal, 81 public comments are not in favour of the proposal to allow
registration as part-time IA/RA. The main concern relates to part time
IA/RA seemingly lowering the service quality. It has been commented that
part-time investment advisors may not have the necessary expertise or
experience, resulting in the reduction in the quality of
advice/recommendations to clients. Poor performance by part-time
practitioners could impact overall credibility and trust in the industry. Part-
time practitioners may not have the resources to provide high-quality
services or maintain proper segregation between roles. It was also
suggested that part-time IA/RA should disclose the nature of other
activities and any conflict of interest between IA/RA activities and their full
time business activities.

ii. Analysis: Part-time IA/RA shall comply with all the regulatory provisions
under the IA Regulations/RA Regulations including qualification and
certification requirements as it would be applicable for a full-time IA/RA.
Thus, there is no compromise on the eligibility criteria, and hence concerns

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 related to difference in the quality of service are misplaced. Part-time IA/RA
shall be categorised as part-time IA/RA while granting certificate of
registration in order to differentiate them from the IA/RA whose only
business activity is providing investment advisory/research services. The
clients of part-time IA/RA shall not exceed seventy-five. They shall be
required to disclose to their clients that they are registered as Part-time
IA/RA in the client agreement/disclosure of terms and conditions to clients.
The part-time IA/RA shall disclose the nature of other activities and shall
ensure that there is no conflict of interest between IA/RA activities and their
full time business activities.

Given the above, the proposal for introduction of the part time IA/RA is
recommended for approval of the Board.

4.5.3. Scope of investment advice- clarity in activities that can be

undertaken by IAs

i. Narrowing the scope of investment advice:

Out of the total 122 public comments received on this proposal, 73 are in
favour of this proposal, however, representation has been received from
(This has been excised for reasons of confidentiality) against this
proposal. One of the main concerns of the industry is that the proposal
limits holistic advice to the investors and narrows the scope of investment
advice.

It has been represented that as per the proposals, IAs will be restricted
from advising on financial products not regulated by SEBI or other Indian
financial regulators. This includes foreign securities, unlisted securities,
products such as real estate and services such as tax planning, estate
planning etc. This could limit the ability to offer comprehensive financial
planning services, as clients often seek advice on a wide range of
investment products, including those outside SEBI’s regulatory scope. The
proposed narrow definition may not reflect the realities of financial
planning, where advice often covers a broader range of financial products

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 potentially leaving clients without guidance on important areas of their
financial life and can lead to incomplete planning and client dissatisfaction.

ii. Analysis: The response and the feedback received on the proposal have
highlighted the financial planning as a holistic exercise that considers the
overall financial needs of the client and is designed to suit the
circumstances of each client. Considering the feedback, while IAs are
allowed to provide advice on products and services other than securities
under purview of SEBI, the proposal has been revised to clarify the scope
of the investment advice under the IA Regulations as below –

a. Investment advice related to securities under purview of SEBI shall only

fall under the purview of IA Regulations.
b. For the products and services not under the purview of SEBI, IA shall
make disclosure to the client and take appropriate declaration and
undertaking from the client that that such products/services and the
services of IA in respect of such products/services do not come under
regulatory purview of SEBI and that no recourse is available to them with
SEBI for their grievances related to such products/services or services
of IA in respect of such products/services.

The above proposal shall ensure that the IA services continue to remain
investor centric and the investor is made aware that products and services
other than securities markets are not under the purview of SEBI.

With the above modification to the scope of investment advice, the

proposal is recommended for approval of the Board.

4.5.4. Fees chargeable to clients by IAs and RAs

i. Change in fee structure: The majority of the public comments received

on the proposal (118 comments out of 156) are against any cap on
maximum fees charged. Some of the concerns are that the proposed fee
limit for research services of RAs could lead to lower research quality and
financial sustainability issues for RAs and hence the cap on fee limit may

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 be removed or revised. The existing fee limit of ₹ 1.25 lakhs under fixed
fee mode for IAs is too low and should also be revised. Operational costs
and inflation necessitate flexible and realistic fee structures.

ii. Analysis: In order to create a level playing field regarding the maximum
fee that can be charged by IAs and RAs, it has been proposed that RAs
shall also be subject to a maximum fee limit as in the case of IAs. Further,
SEBI has observed instances where RAs charge exorbitant fees from
clients. Several enforcement orders have been passed by SEBI in the
subject matter. RA is in the business model of ‘one to many’, hence
research done for a particular security can be relayed to all his clients.
Further, with the increased use of technology for RA services, the cost of
operations to service the number of clients has drastically come down, thus
justifying the cap on maximum fees charged to clients.

However, considering the feedback received from public on consultation

paper and that the existing limit has been set in 2020, it is proposed that
fixed fee mode limit may be increased to maximum of ₹ 1.51 lakhs p.a. for
IAs (considering the cost inflation indices for the FY 202-21 and 2024-25).

Similar to IAs, the fee limit for RAs shall also stand revised to ₹ 1.51 lakhs
p.a. It may also be noted that limit for fee for RAs shall be applicable only
in case of individual clients of RA including HUF and shall not be applicable
in case of non-individual clients of RA.

It is proposed that cap on maximum fee be adjusted to the Cost Inflation

Index as published by CBDT. This shall be revised and announced by the
Administrative and Supervisory Body (ASB) once in three years after due
consultation with SEBI. Current revisions shall be applicable for FY 2025-
26.

The revised proposal is recommended for approval of the Board.

4.5.5. Consent of client to terms and conditions disclosed by RA and IA-

Client agreement –manner of signature

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 i. While the majority of the public comments i.e. 94 out of 138 were in favour
of the proposal, concerns were raised for proposal of requirement to obtain
the client consent only through Digilocker enabled Aadhaar based e-
signature. It has been represented as impractical and that it unwarrantedly
complicates the process unnecessarily. Further that the current methods
are user-friendly.

ii. Analysis:

The intent was to capture the technological advancement in the ability of

the investors to enter into a valid enforceable relationship. Given the
concerns raised about the ease of doing business, it is proposed to modify
the proposal to enable Digilocker enabled Aadhaar based e-signature as
another option. Digilocker enabled Aadhaar based e-signature of a client
for consent to the terms and conditions/agreement shall not be mandatory.
The signature for the consent can be obtained through other legally
acceptable modes including wet signature. However, it is clarified that
mere ticks/checks on platforms/ on websites shall not denote consent for
these purposes and the same shall be clarified in FAQs.

With the above modification the proposal is recommended for approval of

the Board.

4.5.6. KYC Requirements and maintenance of record

i. Call recording by IAs: While majority of the comments i.e. 78 are in favour
of the proposals, it has been represented that IAs providing
implementation/execution services should not be required to maintain call
recording of every consent for implementation/execution obtained from the
client. Call recording is impractical, onerous and unnecessary. Consents
being maintained by other regulated entities like brokers or Execution Only
Platforms (EOPs) should be considered sufficient compliance by the IA.

ii. Analysis: It is to be clarified that it is not mandatory for IAs to give

advice/execution through telephone call. Maintenance of call recording is

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 required only if the investment advice or execution services are provided
through a call. Intent of the proposal is to capture the audit trail of the
communications between the regulated entity and its clients for the
recommendations being made. This forms the basis of the relationship
between the investor and the intermediary.

Given the above, with the above clarification, the proposal is recommended
for approval of the Board.

4.5.7. Compliance audit requirements for IAs and RAs

i. Extension of Audit Timelines: While majority of the public comments i.e.

86 out of 141 are in favour of the proposal, some of the comments raised
some concern on the timeline. It has been represented to extend the
compliance audit timeline from two months to six months. A two-month
deadline imposes excessive pressure and costs, while a six-month period
aligns with statutory audits and reduces burden on auditors and firms.
Extend deadlines to prevent conflicts with other regulatory and audit
deadlines.

ii. Analysis: Considering the feedback, as the comments provided aim at

ease of doing business, it is proposed to retain the existing timeline to
complete annual compliance audit i.e. within six months from the end of
each financial year.

Given the above, only the proposal w.r.t. timeline is modified to six months
from end of the financial year and is recommended for approval of the
Board.

4.5.8. Clarity in applicability of IA and RA Regulations to trading call

providers

i. Trading call providers not to be registered as IA: It was proposed to

clarify that if the trading call is provided after the risk profiling of the client
and product suitability assessment, such trading calls are on “one to one”
basis and shall come under the purview of IA Regulations and if the trading

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 call is provided without any risk profiling of the client and product suitability
assessment, such trading calls are on “one to many” basis and shall come
under the purview of RA Regulations.

While majority of the public comments i.e. 88 out of 113 are in favour of the
proposal, the (This has been excised for reasons of confidentiality),
has represented that trading call providers should exclusively hold RA
licenses and not IA licenses. Trading call providers give short-term,
security-based recommendations that are not personalized and thus make
them fit better under RA regulations.

ii. Analysis: There appears to be logic in the suggestion to exclusively slot

the trading call providers in RA. Trading calls are security and strategy
specific and are not client centric. Thus it is a one to many relationship,
which is clearly the role of RA. There appears to be remote possibility of
the trading calls based on client specific needs.

Upon wider deliberation on the feedback internally and within IAC, it is

acknowledged that the intent of the trading call is to maximize the profit of
the investor based on short-term, security-based recommendations that
are not personalized and hence such trading calls fall under the category
‘one to many’ and hence shall fall under the RA Regulations. These trading
calls include intraday, ultra-short duration and non-delivery based (other
than hedging) trading calls. IAs shall not provide such trading calls to their
clients.

Given the above, the revised proposal is recommended for approval of the
Board.

5. Proposals for consideration and approval of the Board:

5.1. The public comments are in favor of the 22 proposals out of the 24 proposals in
the consultation paper considered in this Board Memorandum. The five proposals
as discussed in para 4 above, changes have been based on suggestions received

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 in the public comments, industry representations and the recommendations of
IAC.

5.2. The proposals for consideration and approval of the Board are mentioned below
in brief. The proposals are detailed in Annexure D.

5.2.1. Relaxation in eligibility criteria for IAs and RAs:

i. Qualification: The minimum qualification requirement is proposed to be

reduced from an existing requirement of a post-graduation or professional
qualification to a graduate degree.
ii. Experience: There shall be no experience requirements for individual
IAs/RAs, their principal officers or persons associated with investment
advice/research services.
iii. Certification: IAs/RA shall be required to have base certifications (NISM-
Series-XA and XB for IAs, and NISM-Series-XV for RAs) only initially at
the time of registration. No base certifications shall be required to be
obtained subsequently.
Instead, a certification based only on the examination on incremental
changes/ developments during the previous three years or period as
specified in the regulatory and professional space concerning IAs shall be
required to be obtained. Such certification on incremental changes/
developments shall be required to be obtained before expiry of validity of
previous certification.
iv. Net-worth requirement: There shall not be any requirement of
maintaining minimum net worth at all times by IAs and RAs. Instead, IAs/
RAs shall maintain a deposit for such a sum as may be specified by SEBI
which shall be lien marked to a stock exchange recognised as
Administration and Supervisory Body for IA/RA (IAASB/RAASB) for
utilisation towards dues emanating out of arbitration and conciliation
proceedings, if any, under the Online Dispute Resolution (ODR)
Mechanism or any other mechanism as may be specified by SEBI, if the

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 IA/RA fails to pay such dues. The following deposit requirement is
specified.
 Up to 150 clients: ₹ 1 lakh
 150 to 300 clients: ₹ 2 lakh
 300 to 1,000 clients: ₹ 5 lakhs
 1,000 and above clients: ₹ 10 lakhs

5.2.2. Allowing registration as both investment adviser and research

analyst:

Individuals or a partner-ship firms may be allowed to seek registration as

both IA and RA provided that they shall be required to comply with the
rules/regulations/reporting requirements under both the IA Regulations and
RA Regulations separately and shall ensure that its investment advisory
services and research services are clearly segregated from each other.

5.2.3. Registration as Part-time investment adviser and research analyst-

An applicant who is Individual or partner-ship firm may be considered for

registration as Part-time IA and RA in case they are also engaged in other
business activities and employment (other than related to securities)
provided that such other business activity/employment –

i. does not involve handling or managing of money or funds of

client/person, or
ii. is not related to providing advice/recommendation to any client/person in
respect of any products/assets for investment.

5.2.4. Relaxation in designation of principal officer:

Non-individual RA or research entity shall also be required to designate

‘principal officer’ on similar lines of IA. IA/RA having multi-line businesses
may designate business head of IA/RA services as ‘principal officer’.

5.2.5. Allowing appointment of independent professionals as compliance

officer:

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 Non-individual IAs and RAs may be allowed to appoint independent
professionals such as CA/CS/CMA as compliance officer in place of a full-
time compliance officer. The principal officer of such IAs and RAs shall
provide undertaking stating that principal officer shall be responsible for
monitoring the compliance by the IA/RA in respect of the requirements of
the Act, regulations, notifications, guidelines, instructions issued by the
SEBI/IAASB/RAASB.

5.2.6. Clarity in activities that can be undertaken by IAs - scope of

investment advice:

The scope of the investment advice under IA Regulations shall be as

follows: –

i. Investment advice related to securities under purview of SEBI shall only fall
under the purview of IA Regulations.
ii. For the products and services not under the purview of SEBI, IA shall make
disclosure to the client and take appropriate declaration and undertaking
from the client that that such products/services and the services of IA in
respect of such products/services do not come under regulatory purview of
SEBI and that no recourse is available to them with SEBI for their
grievances related to such products/services or services of IA in respect of
such products/services.

5.2.7. Use of Artificial Intelligence -AI tools in IA and RA services:

The responsibility of investment advisory services/research services lies

solely with the IA/ RA, irrespective of the scale and scenario of IA/ RA using
AI tools.

5.2.8. Flexibility to IAs to change the modes of charging fees to clients by

IAs:

IAs shall be provided flexibility to change the fee mode (fixed fee mode to
AUA mode and vice –versa) for a client at any time, without restriction on
the minimum period between two fee mode changes subject to the fee not

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 exceeding the higher of the limits of fixed fee mode or AUA mode per annum
per family. For the purpose of charging fee under AUA mode, AUA shall
mean the aggregate net asset value of securities under the purview of SEBI.
Further, considering the responses received and that the existing limit has
been set in 2020, it the fee limit under the fixed fee mode for IAs may be
increased to maximum of ₹ 1.51 lakhs p.a. (considering the cost inflation
indices for the FY 202-21 and 2024-25 published by Central Board of Direct
Taxes (CBDT)). The fee limit shall be reviewed every three years to adjust
to the inflation. The limit on fee under fixed fee mode chargeable to clients
by IAs shall not be applicable in case of non-individual clients.

5.2.9. Relaxation in requirement for corporatisation by individual IAs:

IAs shall now be required to apply as non-individual IA on having -(i) 300

number of clients, or (ii) fee collection of INR 3 crore during the financial
year, whichever is earlier, instead of the existing limit of 150 clients. A period
of up to three months shall be available to the IA to complete the transition
process.

5.2.10.Definition of research analyst and research services:

Definition of ‘research analyst’ is proposed to be modified and the term

‘research services’ shall be defined separately. It is proposed that the
services being provided by Research analyst shall be ‘for consideration’.
Research services being provided by RA shall also include
‘recommendation of model portfolio by RAs’, ‘stop loss target’ and ‘any
other service of similar nature or character’.

5.2.11.Research services to be corroborated by research report containing

relevant data and analysis:

Any research service by a RA shall be corroborated by research report

containing the relevant data and analysis forming the basis for such
research service. RA shall maintain record of such research report.

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5.2.12. Clarity in identification of persons associated with research
services:

In terms of the existing provisions of RA Regulations, the term ‘research

analyst’ also include associated persons. In order to recognise persons
associated with research services separately, the term ‘persons
associated with research services’ is defined separately, on similar lines
as IA Regulations.

5.2.13. Exemption to proxy advisers from RAASB framework:

Considering the nature of services being provided by proxy advisers and

potential conflict of interest in the administration of proxy advisers by the
exchange being the RAASB, Proxy advisers shall be exempted from
RAASB framework.

5.2.14.Eligibility of partnership firm for registration as RA and certification

requirement for its partners:

In order to provide clarity on eligibility of partnership firm for registration as

RA, amendments may be made to Regulation 6(i) of RA Regulations to
include the words “or partnership firm”. Amendments may be made to
Regulation 7(2) of RA Regulations, to provide clarity that NISM certification
shall be required for the partner of the partnership firm only if he/she is
engaged in in preparation and/or publication of research report or
research analysis.

5.2.15.Fees chargeable to clients by RAs:

RAs may charge maximum fees of ₹ 1,51,000 per annum per family in case
of their clients who are individuals. The fees shall be reviewed every three
years to adjust to the inflation index–CII-CBDT. If agreed by the client, RA
may charge fees in advance for one quarter. The limit on fee chargeable
to clients by RAs shall not be applicable in case of accredited investors and
non-individual clients.

5.2.16.Client-level segregation of research and distribution services by RAs:

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 i. Similar to the provisions in IA Regulations, RA or research entity shall
require to have a clear client–level segregation of research services
and distribution services at family/group level.

ii. IAs/RAs providing investment advisory/research services exclusively to

institutional clients and accredited investors may be exempted from
compliance with the requirement of segregation of investment
advisory/research services and distribution services provided these
clients sign a standard waiver stating the above.

5.2.17.Guidelines for recommendation of model portfolio by RAs:

The framework for model portfolio (as mentioned at Annexure E) provides

the safeguards for the model portfolio framework such as issuance of the
model portfolio report, methodology, labelling of model portfolio,
investment horizon, rebalancing of securities, risk disclosures,
benchmarking and audit requirements. The reporting and disclosure
requirements related to model portfolio shall be standardised by industry
experts in consultation with the RAASB and SEBI.

5.2.18. Disclosure of terms and conditions of services to client:

RA shall be required to make disclosure of the minimum terms and

conditions of services to client (as mentioned at Annexure F) and seek
their consent to these terms and conditions.

5.2.19. KYC Requirements and maintenance of record by RAs

RA shall be required to follow KYC procedure as specified by SEBI for

their fee paying clients and maintain the KYC record and upload the KYC
details on KRA system.

5.2.20.Compliance audit requirements for IAs and RAs:

A CA/CS/CMA can conduct annual compliance audit of IAs/RAs. Audit

report should contain line-wise compliance status of every specific
provision of the IA Regulations and RA Regulations and the audit report
and adverse findings, if any may be submitted within the specified timeline.
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 5.2.21.Clarity in applicability of IA and RA Regulations to trading call
provider

Trading calls such as intraday, ultra-short duration and non-delivery based

(other than hedging) are short- term security-based recommendations that
are not personalised/investor-specific and hence such trading calls fall
under the category ‘one to many’ and consequentially shall fall under the
RA Regulations. IAs shall not provide such trading calls to their clients.

5.3. It is proposed to implement the aforesaid proposals by making the amendments

to IA Regulations, RA Regulations and through the issuance of the circular(s)
thereunder. Draft amendment to the IA Regulations, RA Regulations are placed
at Annexure G.

5.4. The amendments to the IA Regulations, RA Regulations are proposed to be

effective from the date of their publication in the official gazette.

6. Proposal

6.1. The Board is requested to consider and approve the proposals at paragraphs 5.2
to 5.4 mentioned above in the Memorandum and authorize the Chairperson to
carry out suitable amendments to the regulations and to take any other
consequential or incidental steps for implementation of the decisions of the Board.

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 Annexure A
(Consultation paper is available on SEBI website www.sebi.gov.in at Reports & Statistics
» Reports » Reports for Public Comments)

Annexure B
(Proposals are part of the consultation paper available on SEBI website www.sebi.gov.in
at Reports & Statistics » Reports » Reports for Public Comments )

Annexure C
(This has been excised for reasons of confidentiality)

Annexure D
Proposals in details for consideration and approval of the Board

1. Relaxation in eligibility criteria for IAs and RAs – minimum qualification,

experience, certification and net worth
1.1 Qualification-In order to attract young minds towards the professions of IA and
RA and to enable ease of entry for persons intending to provide investment
advice/ research services within the regulatory ambit of SEBI, it is proposed to
relax the existing minimum qualification requirements for registration as IA or
RA from a post-graduation to a graduate degree.

1.2 Certification-Currently, IAs and RAs are required to obtain the prescribed
certifications from NISM (NISM-Series-XA and XB for IAs, and NISM-Series-XV
for RAs) (base certifications) at the time of registration. They are required to
obtain the same base certifications before expiry of validity of such certifications.
The concerns have been raised by IAs and RAs that the requirement to obtain
the same base certification afresh every time, to keep their registration in force,
creates an uncertainty of business continuity. In order to address these
concerns of IAs and RAs and to simplify compliance requirements, while
maintaining the standards of knowledge and skills commensurate with the

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 requirements of IA and RA professions, it is proposed that IAs and RAs shall be
required to obtain the base certifications only initially at the time of registration
as IA/RA. Thereafter, they shall be required to obtain a certification that shall be
based only on the incremental changes or developments during the previous
three years or a period of time as may be specified, in the regulatory and
professional space concerning IAs and RAs. Such certification on the
incremental changes or developments shall be required to be obtained by IAs
and RAs before expiry of previous certification.

1.3 Experience- Considering that the comprehensive certification requirements for

IAs and RAs shall ensure that IAs and RAs possess relevant knowledge and
skills desired to provide their services, it is proposed to dispense with the
experience requirements for registration as IA and RA.

1.4 Net-Worth- IAs/RAs provide their investment advisory/research services

broadly owing to their understanding and knowledge of the subject and their
skills to arrive at a suitable advice/recommendation under a particular
circumstance. The services provided by them are fee based and they do not
manage the funds and securities of the client. There are also no significant
infrastructure requirements. Hence, there shall be no requirement of
maintaining minimum net worth at all times by IAs and RAs. Instead, IAs/RAs
shall maintain a deposit for such a sum as may be specified by SEBI from time
to time. Such deposit shall be lien marked to stock exchange as IAASB/RAASB
for utilisation towards dues emanating out of arbitration and conciliation
proceedings, if any, under the Online Dispute Resolution (ODR) Mechanism or
any other mechanism as may be specified, if the IA/RA fails to pay such dues.
Deposit requirements shall be calculated based on the any of the parameters
such as number of clients, revenue etc. Similar to net-worth requirements, the
deposit requirements may also be reviewed by SEBI from time to time based
on relevant data.

1.5 The existing and proposed qualification, experience, certification and net worth
requirements for IAs and RAs are summarised in the table given below:

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Existing Existing regulatory Proposed regulatory
regulatory provisions for RAs changes for IAs and RAs
provisions for
IAs
I. Qualification and Experience:

 Professional  Professional  For an individual IA/RA,

qualification/ Post qualification/ PG partner, principal officer of
Graduate (PG) degree/PG diploma non-individual IA/RA:
degree/PG in specified field, or A graduate degree or a PG
diploma in  Graduate with degree/ PG diploma or
specified field or experience of at least professional qualification
CFA or a PG five years in specified in specified field or a PG
program from field program from NISM or a
NISM, and  For employees of professional qualification
 Experience of at proxy adviser: by obtaining a CFA Charter
least five years for Graduate in any from the CFA Institute.
individual IA and discipline  For persons associated
principal officer of with investment advice/
non-individual IA research services and
 Experience of at employees of proxy
least two years for adviser:
persons A graduate degree in any
associated with discipline
investment advice  Experience: No
experience requirement
II. Certification requirements:
 Certification from  Certification from  Certification from NISM
NISM or any other NISM or other  Requirement of base
organization/ certification certifications (NISM-
institution recognized by SEBI Series-XA and XB for IAs,
including  Fresh certification and NISM-Series-XV for
Financial before expiry of RAs) only initially at the
Planning validity of existing time of registration as IA
Standards Board certification and RA.
of India (‘FPSB  Fresh NISM certification
India’) or any before expiry of validity of
recognized stock existing certification. Such
exchange in India certification from NISM
provided such shall be based only on the

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 certification is incremental changes/
accredited by developments during the
NISM previous three years or a
 Fresh certification particular period of time as
to be obtained may be specified, in the
before expiry of regulatory and
validity of existing professional space
certification concerning IAs/RAs.
III. Minimum net worth requirements

 Individual: Min.  Individual/partnership  There shall be no

₹ 5 lakh firm: Min. ₹ 1 lakh requirement of any net
 For non-individual  Body worth for IAs and RAs.
IA: Min. ₹ 50 lakh corporate/Limited  Instead, IAs and RAs to
Liability Partnership: maintain a deposit lien
Min. ₹ 25 lakh marked to stock exchange
recognized as
IAASB/RAASB for such a
sum as may be specified
by SEBI from time to time.
 The amount of deposit to
be maintained by IAs/RAs:
 Up to 150 clients: ₹ 1
lakh
 150 to 300 clients: ₹ 2
lakh
 300 to 1,000 clients: ₹ 5
lakhs
 1,000 and above clients:
₹ 10 lakhs
1.6 The qualification and certification requirement are detailed below -

(i) Individual RA/IA, partners, if engaged in research services/ or advisory

services and principal officer of non-individual IA/RA or research entity
shall have the following minimum qualifications:

A graduate degree or post graduate degree/ post graduate diploma or

professional qualification in finance, accountancy, business management,
commerce, economics, capital market, banking, insurance, actuarial

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 science or other financial services from a university or institution
recognized by the Central Government or any State Government or a
recognized foreign university or institution or association or a professional
qualification by completing a Post Graduate Program in the Securities
Market (Investment Advisory) (for IAs)/(Research Analysis)(for RAs)
from NISM of a duration not less than one year or a professional
qualification by obtaining a CFA Charter from the CFA Institute.

(ii) Persons associated with investment advice, persons associated with

research services and employees of proxy advisers shall have a graduate
degree in any discipline from a university or institution recognized by the
Central Government or any State Government or a recognized foreign
university or institution.

(iii) Individual RA/IA, partners, if engaged in research services/ advisory

services, principal officer of non-individual IA/RA or research entity,
persons associated with investment advice, persons associated with
research services and employees of proxy advisers shall have at all times
a relevant NISM certification as specified by the Board from time to time.

Provided further that a fresh relevant NISM certification as specified by the

Board from time to time shall be obtained before expiry of the validity of
the existing certification to ensure continuity in compliance with the
certification requirements.

2. Allowing registration as both Investment Adviser and Research analyst:

2.1 There has been a demand from the IAs/RAs to allow them to provide both IA
and RA services to their clients as the activities under these services are
overlapping in nature. Considering this, individuals or partner-ship firms may be
considered eligible for grant of certificate of registration as both IA and RA
provided that they shall comply with the rules/regulations/reporting
requirements under each of these regulations separately.

2.2 These IAs/RAs shall provide an undertaking stating that they shall maintain
arms-length relationship between their activity as IA and RA and shall ensure

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 that its investment advisory services and research services are clearly
segregated from each other.
3. Registration as Part-time investment adviser/research analyst:
3.1 In terms of Regulation 15(3) of the IA Regulations and Regulation 24(1) of the
RA Regulations, an investment adviser/research analyst is required to maintain
an arms-length relationship between its activities as an investment
adviser/research analyst and other activities. Accordingly, individuals or a
partner-ship firms who are engaged in other activities are considered not eligible
for registration as IA/RA.

3.2 There has been feedback that individuals or partner-ship firms who are engaged
in the business not related to securities may also be allowed to seek registration
as IA/RA.

3.3 Considering this, the applicants who are individuals or partner-ship firms shall
be considered eligible for registration as Part-time IA/RA if they are engaged in
other business activity /employment (other than related to securities) provided
that such other business activity/employment -

a. does not involve handling or managing of money or funds of

client/person, or
b. is not related to providing advice/recommendation to any client/person
in respect of any products/assets for investment.
3.4 The applicant shall be considered eligible for registration as part-time IA/RA, if
he is engaged in activity/business/employment permitted by any financial sector
regulator or an activity under the purview of statutory self-regulatory
organisations such as Institute of Chartered Accountants of India (‘ICAI’). For
example, tax planning by CA, insurance agent having license from IRDA.

3.5 Such IAs/RAs shall be categorized as part-time IA/RA in order to differentiate

them from the IA/RA whose only business activity is as IA/RA.

3.6 An individual who is employed shall be required to provide a no objection

certificate (NOC) from his/her employer to seek registration as part-time IA/RA.

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3.7 Part-time IAs/RAs shall be required to have similar qualification and certification
requirements prescribed under IA regulations and RA Regulations for full-time
IAs and RAs.

3.8 There shall be a specified limit for number of clients to whom such part-time
IA/RA provide service at one point of time. The number of clients of part-time
IA/RA shall not exceed seventy-five clients.

3.9 Part-time IA/RA shall provide an undertaking stating that it will maintain arms-
length relationship between its activity as IA/RA and other activities and shall
ensure that its investment advisory services /research services are clearly
segregated from all its other activities.

3.10 Part-time IA/RA shall provide disclaimer (in a font size as may be specified)
while providing their other service/raising invoice related to other
business/service that the activity/invoice is related to services not under purview
of SEBI and no complaint can be raised to SEBI for the services rendered
therein.

3.11 Examples/illustrations:

In order to have further clarity, reference may be made to the following

examples/illustrations of the business activities/employments that the applicant
may or may not have engaged in, to consider it eligible for registration as part-
time IA/RA.

a. Who shall be considered eligible for registration as part-time IA/RA?

i. Person is employed as professor, teacher etc. provided that his
employer provides no objection certificate to take up the activity as
part-time IA/RA.
ii. Persons engaged in education related business/activities etc.
iii. Person is professional such as an architect, lawyer, doctor etc.
b. Who shall not be considered eligible for registration as part-time IA/RA?
i. Person providing advice/recommendations on assets such as
gold, real estate, cryptocurrency etc.

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 c. Who is required to register as part-time IA/RA?
i. If a CA for the purpose of tax planning/tax filing provides
advice/recommendation on securities as asset class, he is not
required to get registered as a part-time IA/RA. However, if a CA
is providing security-specific advice/recommendation to its client
even though as part of tax planning/tax filing, he is required to seek
registration as part-time IA/RA.
ii. If a person is engaged in education activity or is employed as a
professor and as part of employment/business, is providing a
security-specific information/recommendation, he is required to
seek registration as IA/RA.
4. Relaxations in designation of ‘principal officer’:
4.1 As per the existing requirements, non-individual IAs are required to appoint a
Principle Officer who is required to be the managing director or designated
director or managing partner or executive chairman of the board or equivalent
management body who is responsible for the overall function of the business
and operations of non-individual investment adviser.

4.2 There have been representations from the IA industry that for a body corporate
engaged in carrying out multiple line of business, the managing director,
designated director or executive chairperson of such body corporate may not
be involved directly in the day to day functioning of the specific
division/department providing investment advisory services and hence the
business head/unit head of such division/department providing investment
advisory services may be allowed to be appointed as Principal Officer.

4.3 Considering the above, it is proposed to allow a non-individual IA which is

engaged in multiple line of businesses through separate departments/divisions,
to appoint the business head or unit head of its investment advisory activities,
who is responsible for the overall function of the business and operations of the
investment advisory services, as its Principal Officer. Entities engaged in mono-
line business as IA must appoint the managing director or designated director
or managing partner or executive chairperson of the board or equivalent
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 management body as Principal Officer. A non-individual entity who is engaged
in both activities i.e. IA and RA but has no other business/activity, shall be
treated as a mono-line business.

4.4 For a partnership firm, one of the partners must be designated as Principal
Officer and shall be required to comply with the necessary requirements
including the qualification and certification requirements. Partner-ship firms
which do not have the eligible partner shall be provided a timeline within which
they shall be able to convert their legal structure to Limited Liability Partnership
(LLP).

4.5 The RA Regulations, currently, do not have a specific provision for non-
individual RAs or research entity to have a Principal Officer. It is necessary that
the overall function of business and operations of non-individual RAs should be
looked into by a responsible person. Accordingly, it is proposed to bring in the
requirement of designating a Principal Officer for non-individual RAs and
research entities in the RA Regulations on similar lines as IAs.

5. Allowing appointment of independent professionals as Compliance Officer:

5.1 In terms of Regulation 20 of the IA Regulations, a non-individual investment
adviser is required to appoint a compliance officer who shall be responsible for
monitoring the compliance by the investment adviser in respect of the
requirements of the SEBI Act, 1992 (the Act) and regulations, notifications,
guidelines, instructions issued by the Board.

5.2 Similarly, in terms of Regulation 26 of the RA Regulations, research analyst or

research entity which is a body corporate or limited liability partnership firm is
required to appoint a compliance officer who shall be responsible for monitoring
the compliance of the provisions of the Act and regulations and circulars issued
by the Board.

5.3 In terms of SEBI circular on outsourcing dated December 15, 2011,

the intermediaries desirous of outsourcing their activities shall not
outsource their core business activities and compliance functions.

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 5.4 There have been representations from the industry associations for considering
appointment of independent professionals such as CA/CS/CMA as compliance
officer in place of a full-time compliance officer. Having such independent
professionals as compliance officer shall reduce the cost of compliance for
IAs/RAs. It is submitted that in terms of the existing provisions in IA Regulations
and proposed provisions in RA Regulations, Principal Officer is responsible for
overall functioning of the non-individual IA/RA including compliance.

5.5 In view of the above submissions, it is proposed that IAs and RAs may appoint
an independent professional who is CA or CS or CMA or any other
professional/person as may be specified by SEBI as compliance officer.
However, in such cases, the principal officer shall be required to submit an
undertaking to SEBI/IAASB/RAASB to the effect that Principal Officer shall be
responsible for monitoring the compliance by the IA/RA in respect of the
requirements of the Act, regulations, notifications, guidelines, instructions
issued by the SEBI/IAASB/RAASB.

5.6 It is also proposed that independent professionals must have obtained the
relevant certifications from NISM, as may be specified by SEBI, for being
considered for appointment as a compliance officer.

6. Clarity in activities that can be undertaken by IAs - scope of investment advice

6.1 In terms of regulation 2(1) (ac) of the IA Regulations, “investment advice”
includes advice relating to securities or investment products and includes
financial planning.

6.2 It has been observed that IAs are also providing investment advice on various
assets including real estate, gold, etc. which are not regulated by financial sector
regulators. It is also observed that IAs are also providing other/ ancillary services
such as estate planning, tax planning, etc.

6.3 These unregulated products and services may have complex and non-
transparent structures, hidden fees and may not be subject to same level of
scrutiny as regulated products. There may not be clear disclosure of the risks
while investing in these products/availing such services. The relationship of

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 investment adviser has a fiduciary duty towards its client and it would be difficult
to ascertain the potential conflict of interest in case of unregulated products and
services. Further, there shall be limited or no recourse to the investors in case
of any grievances. Potential legal action in case of unregulated products and
services may have implications for an investment adviser that may not be dealt
with within the securities laws.

6.4 Considering the above, it was proposed in the consultation paper that IAs can
give investment advice in respect of a specific instrument/ product only if it
belongs to an asset class pertaining to securities under purview of SEBI or
investment products that are under the regulatory purview of other financial
sector regulators.

6.5 It was proposed that for clients availing financial planning services of IAs, IAs
may provide financial planning on broad allocation of different asset classes
including asset classes under financial sector regulators and other legally
permitted asset classes such as real estate, gold, etc.

6.6 However, the feedback on the proposal was received from the IAs that this could
limit the ability to offer comprehensive financial planning services, as clients
often seek advice on a wide range of investment products, including those
outside SEBI’s regulatory scope including foreign securities, unlisted securities,
products such as real estate, gold and the services such as tax planning, estate
planning etc. and this can lead to incomplete planning and client dissatisfaction.

6.7 Considering this, it is now proposed that the scope of the investment advice
under the IA Regulations may be specified as below –

(i) Investment advice related to securities under purview of SEBI shall only
fall under the purview of IA Regulations.
(ii) For the products and services not under the purview of SEBI, IA shall
make disclosure to the client and take appropriate declaration and
undertaking from the client that that such products/services and the
services of IA in respect of such products/services do not come under
regulatory purview of SEBI and that no recourse is available to them

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 with SEBI for their grievances related to such products/services or
services of IA in respect of such products/services.
7. Use of Artificial Intelligence (‘AI’) tools in IA and RA services
7.1 With the technological innovations and advancements, many AI tools are
currently available in chatbot form such as OpenAI’s ChatGPT, Google’s
Gemini, etc. AI based tools allow one to have human-like conversations and
receive human like responses with the chatbot. These tools assist various tasks
such as summarizing and analyzing data and may help in improving efficiency
and productivity.

7.2 AI Chatbots rely on algorithms. It must be noted that the algorithm for the
purpose of finding out relevant pieces of information, method of analysis of
information and method of drawing inferences needs to be provided to these AI
tools. These AI tools, however, may not adequately safeguard sensitive data
shared during conversations, potentially leading to unintended data exposure
and concerns related to data security.

7.3 IAs provide personalised services according to client-specific requirements

based on risk profiling and suitability. Similarly, RAs provide recommendations
based on certain parameters and methodology adopted and are required to
keep records of the research report, research recommendations and rationale
for arriving at research recommendations.

7.4 While AI tools can provide significant assistance in the work of IAs and RAs,
they may not always give meaningful outputs that are expected to be based on
the understanding of complex security-specific or client-specific scenarios/
requirements (i.e., personal/ financial conditions or goals). Further, they may
not always provide all the information based on which output/ recommendation
has been generated. For example, AI tools may not bring out whether the
requirements of risk profiling and suitability have been complied with by IA.

7.5 An IA/RA who uses AI tool for servicing its clients must provide complete
disclosure of the extent of use of such tools to its prospective clients, to enable
them to take informed decision of continuance or otherwise with the IA/RA.

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 7.6 Considering that the investment advice/ research services provided by IA/RA
based on AI tools would affect the investment decision of clients, it is
emphasized that the responsibility of data security, compliance with the
regulatory provisions governing investment advisory services/research services
lies solely with the IA/ RA, irrespective of the scale and scenario of IA/ RA using
AI tools.

8. Flexibility to IAs to change the modes of charging fee to clients

8.1 Presently, IAs can charge fees under two modes, namely, (i) Assets under
Advice (‘AUA’) mode, which is subject to a limit of 2.5 per cent of AUA per
annum per family of client across all services offered by IA, and (ii) Fixed fee
mode, which is subject to a limit of ₹ 1,25,000 per annum per family of client
across all services offered by IA.
8.2 It is proposed to clarify that the limits on fee chargeable to clients by IAs shall
be applicable only in respect of investment advice related to securities under
purview of SEBI.
8.3 Presently, IA can charge fees from a client under any one mode, i.e., AUA mode
or fixed fee mode on an annual basis. Change of mode, if any, can be effected
only after twelve months of on-boarding/last change of mode.
8.4 In order to offer more flexibility in charging of fees, it is proposed to allow IAs to
change the fee mode for a client at any time, without restriction on the minimum
period between two fee mode changes. The maximum fee that can be charged
by the IA shall, however, not exceed higher of fee limit under the fixed fee mode
or 2.5 per cent of AUA per annum per family.
8.5 The maximum fee that can be charged by the IA is revised (considering the cost
inflation indices for the FY 202-21 and 2024-25) and shall not exceed ₹ 1,51,000
per annum per family.
8.6 For the purpose of charging fee under AUA mode, AUA shall mean the
aggregate net asset value of securities under the purview of SEBI.
8.7 The limit on fee under fixed fee mode chargeable to clients by IAs shall not be
applicable in case of non-individual clients.

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 8.8 As already applicable, in case of accredited investors, the limits and modes of
fees payable to the IA shall be governed through bilaterally negotiated
contractual terms.
9. Relaxation in requirement for corporatisation by individual IAs
9.1 As per Regulation 13(e) of the IA Regulations, an individual IA is required to
apply for registration as non-individual IA on or before reaching 150 clients.

9.2 It is noted that due to the evolving nature of business of IAs and the
technological advancements therein such as availability of risk profiling tools,
etc., IAs are in a position to service more number of clients. Based on the inputs
of the IA community, it is proposed to broaden the condition/requirement for
compulsory corporatisation of an individual IA.

9.3 Accordingly, it is proposed that Individual IAs shall now be required to apply for
registration as a non-individual IA on having:

(i) 300 number of clients; or

(ii) fee collection of INR 3 crore during the financial year,

whichever is earlier.
9.4 For removal of doubts, it is also proposed to clarify that “number of clients” shall
mean number of client agreements in force at any point of time i.e. limit of 300
clients not to be exceeded on any day.

9.5 In order to ease the process of transition from individual IA to non-individual IA,
it is proposed that an individual IA shall initially be required to apply for grant of
in-principle registration as non-individual IA. A period of up to three months shall
be available to the IA to complete the transition process. On completion of
transition within the time limit, IA shall surrender his individual IA registration
certificate and will be granted final registration as non-individual IA subject to
compliance with all the requisite requirements of registration.

10. Definitions of ‘research analyst’ and ‘research services’

10.1 The IA Regulations recognise the aspect that there shall be payment of
consideration for the services rendered by an IA. However, the term ‘research

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 analyst’ as defined under regulation 2(1)(u) of the RA Regulations, does not
particularly mention the aspect of payment of consideration for the services
provided by RA and thus is open to arbitrary interpretation of the scope of
research services.
10.2 Therefore, it is proposed to modify the definition of ‘research analyst’ to provide
that, as in the case of IAs, persons providing research services ‘for
consideration’ shall only fall within the definition of research analyst. For this
purpose, the term ‘consideration’ shall mean any form of economic benefit
including non-cash benefit, received or receivable, directly or indirectly, in any
form, whether from client or otherwise, for providing any research services.
10.3 Additionally, it is noted that currently few RAs are also providing
recommendations on basket of securities commonly called as ‘model portfolio’
and are giving recommendation on stop loss target. However, these research
services are not explicitly provided for in the definition of research analyst. In
view of the evolving industry practices, it shall be clarified that the research
services being provided by RA shall also include ‘recommendation of model
portfolio by RAs’, ‘stop loss target’ and ‘any other service of similar nature or
character’. (The term ‘model portfolio’ is defined separately in Annexure E of
the Board Memorandum for ‘Guidelines for ‘model portfolio’ by Research
Analysts’).
10.4 The term ‘research services’ shall be defined separately to specify the services
that research analyst may provide. Research analyst and research services
shall be defined as follows:
“‘Research Analyst’ means a person who, for consideration, is engaged in
providing the research services.”
“‘Research Services’ shall mean the following services provided by research
analyst-
i. preparation or publication of research report or content of research
report; or
ii. providing or issuing research report or research analysis; or
iii. making 'buy/sell/hold' recommendation; or

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 iv. giving price target or stop loss target; or
v. offering an opinion concerning public offer; or
vi. recommending model portfolio;
vii. any other service of similar nature or character,
with respect to securities that are listed or to be listed in a stock exchange,
whether or not any such person has the job title of 'research analyst’, to the
clients or other persons or group of persons or general public.”
11. Research services to be corroborated by research report containing relevant
data and analysis:
11.1 It has been argued that RA Regulations do not explicitly mention that every
research service should be supported by research report that provide the
necessary data and analysis. In this regard, in order to ensure the credibility of
research services provided by a RA, it is proposed to also clarify that any
research service by a RA shall be corroborated by research report containing
the relevant data and analysis forming the basis for such research service. RA
shall maintain record of such research report.

12. Clarity in identification of ‘persons associated with research services’

12.1 In the IA Regulations, ‘persons associated with investment advice’ are
separately recognised and defined; however, the same is not the case for RAs.
Any associated person who reports directly or indirectly to a research analyst in
connection with research activities is also currently identified as ‘research
analyst’ under RA Regulations. In order to bring in consistency in approach and
to provide further clarity on the identification of a person associated with
research services, it is proposed to define the term ‘persons associated with
research services’ in the RA Regulations on similar lines as in the IA
Regulations, wherein –

“‘persons associated with research services’ shall mean any member, partner,
officer, director or employee or any other staff of such research analyst or
research entity, including any person occupying a similar status or performing a
similar function irrespective of the nature of association with the research

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 analyst or research entity, who is engaged in providing research services to the
clients or other persons or group of persons or general public.

Explanation. - All client and public facing persons such as analysts, sales staff,
service relationship managers, client relationship managers, etc., by whatever
name called, shall be deemed to be persons associated with research services,
but shall not include persons who discharge clerical or office administrative
functions where there is no connection with research services and they have no
client contact.”

13. Exemption to Proxy Advisers from RAASB framework

13.1 SEBI has issued a framework for RAASB for administration and supervision of
RAs. The RAASB framework has also become applicable to proxy advisers
(PAs) as they are also governed under RA Regulations. RAASB framework has
been put in place considering the potential growth in the number of RAs and
their effective administration and supervision. Currently, there are only four
registered PAs.
13.2 SEBI has received a representation from proxy advisers that proxy advisers
may be exempted from the RAASB framework considering the nature of their
services, which is different from the security-specific services/recommendations
being given by RA, and potential conflict of interest in the administration of proxy
advisers by the exchange being the RAASB.
13.3 Considering the above, it is proposed that proxy advisers may be exempted
from the RAASB framework and their administration and supervision shall lie
entirely with SEBI.
14. Eligibility of ‘partnership firm’ for registration as RA and certification
requirement for its partners
14.1 Regulation 6(i) of RA Regulations inter alia states that for the grant of certificate
for registration as RA, it shall take into account as to whether the applicant is
individual or a body corporate or LLP. However, it does not mention ‘partnership
firm’. Hence, Regulation 6(i) of RA Regulations is proposed to be amended to
include the words ‘or partnership firm’.

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 14.2 Regulation 7(2) of RA Regulations inter alia states that “…. and partners of a
research analyst, if any, shall have, at all times, a NISM certification….” It is
proposed to clarify by an amendment to the regulation that, similar to the
qualification requirement under Regulation 7 (1), partners of a research analyst
are required to have NISM certifications only if they are engaged in providing
research services.
15. Fees chargeable to clients by RAs
15.1 In view of their overlapping role, in order to create a level playing field regarding
the maximum fee that can be charged by IAs and RAs, it is proposed that RAs
shall also be subject to a maximum fee limit as in the case of IAs.

15.2 However, based on the feedback received from public on consultation paper
and that the existing limit has been set in 2020, fixed fee mode limit shall be
increased to maximum of Rs. 1.51 lakhs p.a. for IAs.

15.3 Accordingly, the following fee structure is proposed for RAs:

(i) RAs may charge fees, subject to ceiling as may be specified by SEBI and
shall ensure that fee charged to clients is fair and reasonable.

(ii) RAs shall charge a maximum of ₹ 1,51,000 per annum per family in case
of their clients who are individuals. The limit on fee chargeable to clients
by RAs shall be applicable only in case of individual clients of RA
including HUF and shall not be applicable in case of non-individual clients
including clients who are QIBs, accredited investors, and to institutional
investors seeking recommendation of proxy adviser.

(iii) Pursuant to internal discussions, it is proposed that cap on maximum fee

be adjusted to the Cost Inflation Index (CII). This shall be revised and
announced by the Administrative and Supervisory Body (ASB) once in
three years after due consultation with SEBI. Current revisions shall be
applicable for FY 2025-26.

(iv) If agreed by the client, RA may charge fees in advance. However, such
advance shall not exceed fees for more than one quarter.

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 (v) In the event of pre-mature termination of RA services in terms of the
agreed terms and conditions, the client shall be refunded proportionate
fees for unexpired period.

15.4 An IA can charge breakage/ separation/ alienation fees if the client terminates
the agreement prematurely, as the IA is required to expend for on-boarding of
client, perform risk profiling and suitability assessment, which involve fixed costs
that IA may need to recover. However, since such activities are not required for
RAs, there shall not be any breakage/ separation/ alienation fee to be retained
by RAs in the event of pre-mature termination of RA services in terms of the
agreed terms and conditions.

16. Client-level segregation of research and distribution services by RAs

16.1 Presently, an individual IA is not allowed to provide distribution services.
Additionally, family of an individual IA cannot provide distribution services to the
client advised by the individual IA and no individual IA can provide advice to a
client who is receiving distribution services from other family members. A non-
individual IA shall have client level segregation at group level for investment
advisory and distribution services and shall also maintain an arm’s length
relationship between its activities as IA and distributor by providing investment
advisory services through a separately identifiable department or division.
Further, the same client cannot be offered both investment advisory and
distribution services within the group of the non-individual entity.

16.2 The rationale behind the above provisions is that an IA is expected to provide
unbiased and independent advice based on risk profiling and suitability of the
client. The client is further expected to provide consideration to the IA for the
unbiased advice provided by him. However, under distribution model, IAs are
paid by the producers/issuers of the security and investment product, thereby
creating a conflict of interest and compromising on the unbiased and
independent advice provided by them. Since such client level segregation for
investment advisory and distribution services and arm’s length relationship is

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 not possible at an individual level, therefore an individual IA is restricted from
providing distribution services.

16.3 Similarly, RA is expected to provide an independent, unbiased and objective

research in relation to securities. It is important to ensure that there is no conflict
of interest between the research activity and other activities of RA. In terms of
the RA Regulations, research entities are required to have segregation of
research services and other activities. Thus, in order to avoid conflict of interest
with the distribution services provided by the research entity, if any, it is
proposed that, similar to IAs, distribution services and research services may
be segregated in case of RAs.

16.4 Accordingly, it is proposed to have a clear segregation at client level of research

services and distribution services of a RA or research entity and shall have
regulatory provisions similar to IAs in this regard.

RA shall comply with the following regulatory provisions:

1) An individual RA shall not provide distribution services.

2) The family of an individual RA shall not provide distribution services to

the client of the individual RA and consequently individual RA shall not
provide research services to a client who is receiving distribution services
from other family members.

3) A non-individual RA or research entity shall have client-level segregation

at group level for research services and distribution services.

Explanation. —
(i) The same client shall not be offered both research services and
distribution services within the group of the non-individual RA;
(ii) A client can either be a research services client where no distributor
consideration is received at the group level or distribution services client
where no fee for research services is collected from the client at group
level;

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(iii) Group’ for this purpose shall mean an entity which is a holding,
subsidiary, associate, subsidiary of a holding company to which it is
also a subsidiary or an investing company or the venture of the
company as per the provisions of the Companies Act, 2013 for non-
individual RA or research entity which is a company under the said Act
and in any other case, an entity which has a controlling interest or is
subject to the controlling interest of a non-individual RA;
(iv) A non-individual RA or research entity shall maintain an arm’s length
relationship between its activities as RA and distributor by providing
research services through a separately identifiable department or
division;
(v) Compliance and monitoring process for client segregation at group or
family level shall be in accordance with the guidelines specified by
SEBI;
(vi) “Family of an individual research analyst” shall include individual RA,
spouse, children and parents;
(vii) “Family of client” shall include individual client, dependent spouse,
dependent children and dependent parents.

4) To ensure client-level segregation at RA’s group/ family level, following

compliance and monitoring process shall be adopted:

(i) Existing clients, who wish to avail services of the RA, will not be eligible
for availing distribution services within the group/family of the RA.
Similarly, existing clients who wish to take distribution services will not
be eligible for availing research services within the group/family of the
RA.
(ii) A new client will be eligible to avail either research services or
distribution services within the group/family of RA. However, the option
to avail either research services or distribution services shall be made
available to such client at the time of on-boarding.
(iii) “Client” shall include individual client or non-individual client.

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 (iv) A client shall have discretion to continue holding assets prior to the
applicability of this segregation under the existing research/ distribution
arrangement. However, the client shall not be forced to liquidate/ switch
such existing holdings.
(v) PAN of each client shall be the control record for identification and client-
level segregation.
(vi) In case of an individual client, “family of client” shall be reckoned as a
single client and PAN of all members in “family of client” would jointly
and severally be the control record. However, the same shall not be
applicable for non-individual clients.
(vii) The dependent family members shall be those members whose assets
originate from income of a single entity, i.e., the earning client
(individual) in the family. The client shall provide an annual declaration
or periodic updation, as the case maybe, in respect of such dependent
family members.
(viii) RA shall maintain on record an annual certificate from an auditor (in case
of individual RA) and its statutory auditor (in case of a non-individual RA)
confirming compliance with the client-level segregation requirements as
proposed. Such annual certificate shall be obtained within six months
from the end of the financial year and the same shall form part of
compliance audit, in terms of regulation 25(3) of the RA Regulations.
16.5 It is further proposed that IAs/RAs providing investment advisory/research
services exclusively to institutional clients and accredited investors may not be
subject to compliance with the aforesaid requirements of segregation of
investment advisory/research services and distribution services. The investor
however needs to sign a standard waiver stating the above.

17. Guidelines for recommendation of ‘model portfolio’ by RAs

17.1 In terms of Regulation 2(1)(u) of the RA Regulations, a RA can provide
‘buy/sell/hold’ recommendation or give price target with respect to securities that
are listed or to be listed on a stock exchange. It is observed that RAs are issuing

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 ‘model portfolios’ which set out recommendations for multiple securities based
on certain parameters.

17.2 Regulation 20 of the RA Regulations specifies, with respect to the contents of

the research report, that RA or research entity shall take steps to ensure that
facts in its research reports are based on reliable information and shall define
the terms used in making recommendations, and these terms shall be
consistently used. However, there are no guidelines currently in place on the
recommendations of ‘model portfolio’ such as minimum disclosures, rationale
for recommendations, nomenclature and performance of such
recommendations.

17.3 In order to provide clarity on recommendation in respect of model portfolios by

RAs and to provide for safeguards for model portfolios and other similar
products from RAs, it is proposed to issue guidelines for ‘model portfolios’ by
RAs. The proposed model portfolio framework including definition of model
portfolio is given in Annexure E of the Board Memorandum. The reporting and
disclosure requirements related to model portfolio shall be standardised by
Industry Standards Forum (ISF) in consultation with the RAASB and SEBI.

18. Disclosure of terms and conditions of services to client

18.1 Disclosure of terms and conditions and rights of the clients is not mandatory
under the extant RA Regulations. The clients of RA may thus be unaware of
their rights and terms and conditions of the research services of RA availed by
them in case of any grievance. In order to have transparency, explicit client
consent and a document available with the client for his record regarding the
terms and conditions of services availed, the following is proposed:

18.2 RAs shall disclose to the client, the terms and conditions of the research
services offered such as consideration, conflict of interest, risk factors,
mechanism for grievance redressal and dispute resolution etc., including their
rights and obligations. RAs shall ensure that neither any research service is
rendered nor any fee is charged until consent is received from the client on the
terms and conditions.

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 18.3 It is proposed that the minimum mandatory terms and conditions as placed at
Annexure F of the Board Memorandum shall be included in the aforesaid
disclosure.

18.4 Most Important Terms and Conditions (MITC) to be disclosed by IAs and RAs
shall be standardised by industry associations/experts in consultation with
IAASB/RAASB and SEBI.

18.5 IA shall include the following terms and conditions in their MITC:

“This agreement is for the investment advisory services provided by the IA and
IA cannot execute/ carry out any trade (purchase/ sell transaction) on behalf of
the client without his specific and positive consent on every trade. Thus, you are
advised not to permit IA to execute any trade on your behalf without your explicit
consent.”

18.6 IAs/RAs shall also provide guidance to their clients in the agreement/ disclosure
of terms and condition on the optional centralised fee collection mechanism for
IAs and RAs and if the fees can also be paid to it through this mechanism.

18.7 Consent of client to terms and conditions disclosed by RA (in case of the RAs)
and consent of client to agreement between IA and client (in case of the IAs)
shall be signed by the client in person or through any other legally acceptable
mode including digilocker enabled Aadhaar based e-signature.

19. KYC Requirements and maintenance of record

19.1 Under the existing provisions, IAs are required to follow Know Your Client
(‘KYC’) procedure as specified by SEBI and maintain KYC records and are
required to enter into investment advisory agreement with client containing the
mandatory terms and conditions of the services. There is no specific provision
for RAs specifying disclosure of terms and conditions of services and
maintenance of record of client identification and services provided to them.

19.2 As in the case of IAs, since the RA services shall be considered to be for
‘consideration’ and since they are also required to comply with the PMLA
guidelines, it is proposed to clarify that RAs shall follow the KYC procedure for

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 their fee paying clients and maintain KYC records for their clients as specified
by SEBI from time to time.

19.3 KYC records shall be uploaded by IAs and RAs on KRA system as per the
procedure specified by SEBI.

19.4 In addition to the existing requirements, IA/RA shall maintain record of clients
such as list of clients, their PAN, date of investment advisory/research service
provided, nature of investment advisory/research service, details of the
securities /and investment products for which investment advisory/research
service was provided and fee/consideration charged for such service.

19.5 RA shall maintain record of disclosures of the terms and conditions of services
offered to clients of RA as may be specified by SEBI.

19.6 Similar to IAs, RAs shall also maintain records of communication with the
client/prospective client, where any conversation related to its services has
taken place, including communication through physical documents (signed by
client), e-mails, messages etc.

19.7 IAs providing implementation/execution services shall maintain call recording

of every consent for implementation/execution obtained from the client if
advice/execution is given through telephone call. All such communications
shall have time stamp to maintain clear audit trail.

20. Compliance audit requirements for IAs and RAs

20.1 Under the existing regulatory provisions, IA/RA and research entity is required
to conduct annual audit in respect of compliance with the IA Regulations/RA
Regulations and circulars issued thereunder from a member of Institute of
Chartered Accountants of India (‘ICAI’)/ Institute of Company Secretaries of
India (‘ICSI’). It is understood that members of Institute of Cost Accountants of
India (‘ICMAI’) also have the necessary competence to conduct such audit.
Hence, IA/RA and research entity can also conduct yearly audit in respect of
compliance of the IA Regulations/RA Regulations and the circulars and
guidelines issued thereunder also from a member of ICMAI.

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 20.2 It is also noted that many a times audit in respect of the compliance of
regulations is in the nature of providing general compliance with the regulations
without specifying each provision for which compliance audit is conducted and
hence provide little understanding of the specifics of the audit conducted.
Accordingly, Annual compliance audit report for IA/ RA and research entity
shall specify each of the provisions of the IA Regulations/ RA Regulations and
the circulars and guidelines issued thereunder upon which compliance is
reported.

20.3 An IA, a RA or research entity shall -

(i) complete the annual compliance audit within six months from the end of each
financial year and submit a compliance audit report to SEBI/IAASB/RAASB
within such time as may be specified;

(ii) submit adverse findings of audit, if any, along with action taken thereof duly
approved by the individual IA/RA/ or management of non-individual IA/RA or
research entity to SEBI/IAASB/RAASB within a period of one month from the
date of the audit report; and

(iii) maintain on record an annual certificate from a member of ICAI/ ICSI/ ICMAI
confirming compliance with client level segregation requirements. Thus, the
requirement of obtaining certificate from statutory auditor is proposed to be
eased. Such annual certificate shall form part of the compliance audit.

20.4 IA, RA and research entity shall mandatorily have their own website and
publish the status of the compliance audit report on their website. They shall
also publish the adverse findings of audit, if any, along with the action taken
thereof on their website. IA, RA and research entity shall provide the
compliance audit report to their clients.

21. Clarity in applicability of IA Regulations/RA Regulations to trading call

providers
21.1 Currently, the trading calls are being provided by both IAs and RAs.

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 21.2 Based on the feedback received on the consultation paper and
recommendations of IAC, it is noted that intraday, ultra-short duration and non-
delivery based (other than hedging) trading calls are not investor specific and
hence should not be allowed under IA regulations.

21.3 Upon wider deliberation on the feedback internally and within IAC, it is
acknowledged that the intent of the trading call is to maximize the profit of the
investor based on short-term, security-based recommendations that are not
personalized and hence such trading calls fall under the category ‘one to many’
and hence shall fall under the RA Regulations. These trading calls include
intraday, ultra-short duration and non-delivery based (other than hedging)
trading calls.

21.4 Considering the above, with respect to trading call providers, it is proposed to
clarify that-

Intraday, ultra-short duration and non-delivery based (other than hedging)

trading calls shall not be considered investor specific and hence these trading
calls cannot be called to be given “one to one” basis and hence shall come
under the purview of RA Regulations.

21.5 IAs shall not provide such trading calls to their clients.

Annexure E

Guidelines for recommendation of ‘model portfolio’ by Research Analysts

RA shall ensure compliance with the following guidelines on ‘model portfolio’:

1. Definitions

The following terms used in the guidelines on the ‘model portfolio’ shall have the
meaning as mentioned below.

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 i. Model Portfolio: A ‘model portfolio’ shall mean a basket of securities for which a
research report is issued by a RA recommending the relevant weightages for one
or more securities mentioned therein.
Explanation: If the research report does not ascribe weightages to the
components of basket of securities, then merely a summary or consolidated
presentation of securities recommended shall not be regarded as a “model
portfolio”.

ii. Disclosures: Means the minimum set of disclosures as specified in the model
portfolio framework to be mandatorily included in a model portfolio report, in order
to ensure that all the relevant facts and information which could impact the
investment decision of a potential investor are adequately made known to the
investors.

iii. Launch Date: Means the date on which model portfolio report was issued by the
RA.

iv. Update Date: Each model portfolio should clearly list the dates and/or intervals at
which model portfolio shall be reviewed and updated by RA and the launch date
of each such updated model portfolio shall be deemed to be the “Update Date”.

2. Model Portfolio Framework

i. Model portfolio report: Model portfolio shall be issued through a research report
with all constituent securities being recommended to be covered in the research
report and rebalancing to be done at such intervals as the RA deems appropriate.
The opinion of the RA on any constituent securities forming part of the model
portfolio shall not be contrary to its opinion on each of such securities individually.

Model portfolio report shall include a ‘factsheet’ setting out the basic information
on the model portfolio. A model portfolio report must contain disclosures, rationale,
methodology, launch date, update date and type of model portfolio contained
therein.

ii. Methodology: Model portfolio report shall define and discuss the framework
including underlying universe for stock selection and shall be labelled to indicate

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 the type of underlying universe of securities (such as large caps, mid-caps, multi
caps, etc.) or an underlying theme (such as Make in India, Defence, etc.) or a
sector (such as Auto, Textile, etc.). Model portfolio report shall define and discuss
in detail the methodology for selection of constituent securities in the model
portfolio such as fundamental analysis, technical analysis etc. and the parameters
therein.

iii. Labelling: Model portfolio should be ‘true to label’ and should be named in a
manner which clearly states the type of portfolio being created along with a one-
line description of the theme or investment objective of the model portfolio for ease
of understanding for all clients.

iv. Investment Horizon: Model portfolio report should specify the investment horizon
of the model portfolio so that the investor can match that to their investment
period.

v. Frequency of portfolio review and update: Whether the model portfolio would
be updated and at what intervals must be predefined in the report. The
rebalancing, if any, of the constituent securities in the model portfolio shall be done
within the overall framework of the model portfolio and shall be communicated to
the clients along with the underlying rationale.

vi. Risk disclosures: Model portfolio risk should be clearly mentioned in model
portfolio report.

vii. Benchmarking: Each model portfolio shall disclose performance duly validated
(This has been excised for reasons of confidentiality) over different time
periods and should be benchmarked with appropriate and relevant index.

For example, Model portfolio for auto stocks can be benchmarked with Nifty Auto
Index, Mid cap model portfolio can be benchmarked with BSE Midcap Index,
thematic portfolios with thematic indices, etc.

Every model portfolio report shall contain disclosure on the benchmark index which
should be clearly defined and should be used consistently.

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 viii. Audit Requirements: Compliance with audit requirement under regulation 25(3)
of the RA Regulations shall also cover compliance with obligations set out under
the model portfolio framework.

Annexure F

Disclosure of minimum mandatory terms and conditions to clients

RAs shall disclose to the client the terms and conditions of the research services offered
including rights and obligations. RAs shall ensure that neither any research service is
rendered nor any fee is charged until consent is received from the client on the terms and
conditions.

1. Availing the research services: By accepting delivery of the research service, the
client confirms that he/she has elected to subscribe the research service of the RA at
his/her sole discretion. RA confirms that research services shall be rendered in
accordance with the applicable provisions of the RA Regulations.

2. Obligations on RA: RA and client shall be bound by SEBI Act and all the applicable
rules and regulations of SEBI, including the RA Regulations and relevant notifications
of Government, as may be in force, from time to time.

3. Client Information and KYC: The client shall furnish all such details in full as may be
required by the RA in its standard form with supporting details, if required, as may be
made mandatory by SEBI from time to time.

RA shall collect, store, upload and check KYC records of the clients with KYC
Registration Agency (KRA) as specified by SEBI from time to time.

4. Standard Terms of Service: The consent of client shall be taken on the following
understanding:

“I / We have read and understood the terms and conditions applicable to a

research analyst as defined under regulation 2(u) of the SEBI (Research Analyst)
Regulations, 2014, including the fee structure.

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 I/We are subscribing to the research services for our own benefits and
consumption, and any reliance placed on the research report provided by
research analyst shall be as per our own judgement and assessment of the
conclusions contained in the research report.

I/We understand that –

i. Any investment made based on the recommendations in the research report are
subject to market risk.

ii. Recommendations in the research report do not provide any assurance of

returns.

iii. There is no recourse to claim any losses incurred on the investments made
based on the recommendations in the research report.”

Declaration of the RA that:

i. It is duly registered with SEBI as an RA pursuant to the SEBI (Research

Analysts) Regulations, 2014 and its registration details are: (registration
number, registration date);

ii. It has registration and qualifications required to render the services

contemplated under the RA Regulations, and the same are valid and subsisting;

iii. Research analyst services provided by it do not conflict with or violate any
provision of law, rule or regulation, contract, or other instrument to which it is a
party or to which any of its property is or may be subject;

iv. The maximum fee that may be charged by RA is ₹ 1.51 lakhs per annum per
family of client.

v. The recommendations provided by RA do not provide any assurance of returns.

Additionally, if RA is an individual, declaration that:

i. It is not engaged in any additional professional or business activities, on a

whole-time basis or in an executive capacity, which interfere with/influence or

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 have the potential to interfere with/influence the independence of research
report and/or recommendations contained therein.

5. Consideration and mode of payment: The client shall duly pay to RA, the agreed
fees for the services that RA renders to the client and statutory charges, as applicable.
Such fees and statutory charges shall be payable through the specified manner and
mode(s)/ mechanism(s).

6. Risk factors: (A statement covering the standard risks associated with investment in
securities to be added under this clause by the RA)

7. Conflict of interest: The RA shall adhere to the applicable regulations/ circulars/

directions specified by SEBI from time to time in relation to disclosure and mitigation
of any actual or potential conflict of interest. (A statement covering the mandatory
disclosures to be added under this clause by the RA.)

8. Termination of service and refund of fees: Disclosure that the RA may suspend or
terminate rendering of research services to client on account of suspension/
cancellation of registration of RA by SEBI and shall refund the residual amount to the
client.

In case of suspension of certificate of registration of the RA for more than 60 (sixty)

days or cancellation of the RA registration, RA shall refund the fees, on a pro rata
basis for the period from the effective date of cancellation/ suspension to end of the
subscription period.

9. Grievance redressal and dispute resolution: Any grievance related to (i) non-
receipt of research report or (ii) missing pages or inability to download the entire report,
shall be escalated promptly by the client to the person/employee designated by RA,
in this behalf (RA to provide name and e-mail ID of the designated person/employee).

The RA shall be responsible to resolve grievances within 7 (seven) business working

days or such timelines as may be specified by SEBI under the RA Regulations.

RA shall redress grievances of the client in a timely and transparent manner.

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 Any dispute between the RA and his client may be resolved through arbitration or
through any other modes or mechanism as specified by SEBI from time to time.

10. Additional clauses: All additional voluntary clauses added by the RA should not be
in contravention with rules/ regulations/ circulars of SEBI. Any changes in such
voluntary clauses/document(s) shall be preceded by a notice of 15 days.

11. Mandatory notice: Clients shall be requested to go through Do’s and Don’ts while
dealing with RA as specified in SEBI master circular no. SEBI/HO/MIRSD-POD-
2/P/CIR/2023/90 dated June 15, 2023 or as may be specified by SEBI from time to
time.

12. Most Important Terms and Conditions (MITC): RA shall also disclose MITC to their
clients which shall be standardised by Industry Standards Forum (ISF) in consultation
with SEBI and RAASB.

13. Optional Centralised Fee Collection Mechanism: RA Shall provide the guidance
on an optional centralised mechanism for fee collection available to their client for
payment of fees to RA.

Annexure G
(Amendments shall be notified after following the due process)

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