SEBI, by way of two Circulars dated January 8, 2025, has introduced guidelines for Research Analysts (‘RAs’) and Investment Advisors (‘IAs’). The key takeaways from the Circulars include:

i.    Deposit Requirements: A tiered deposit structure has been introduced for IAs and RAs based on the number of clients served on any given day during the previous financial year. The deposits to be maintained range from INR 100,000 (~ USD 1,170) to INR 1,000,000 (~ USD 11,670) depending on number of clients;

ii.   Scope of Investment Advice: IAs are now allowed to provide investment advice only on securities under SEBI’s purview. However, they may offer comprehensive financial planning services including advise on products outside of SEBI’s jurisdiction, subject to disclosure to their clients that such services are not regulated by SEBI, and they would have no re-course to SEBI for grievances for such products;

iii.  Appointment of an Independent Professional as Compliance Officer: A non-individual IA or RA can appoint an independent professional who is a member of the Institute of Chartered Accountants of India (ICAI) or the Institute of Company Secretaries of India (ICSI) or Institute of Cost Accountants of India (ICMAI) or a member of any other professional body as may be specified by the SEBI, provided such a professional holds a relevant certification from National Institute of Securities Markets (NISM)and the principal officer of the IA submits an undertaking on being responsible for monitoring the compliance with regulatory requirements; and

iv.   Client Level Segregation of Advisory and Distribution Activities: IAs providing investment advisory services exclusively to institutional clients and accredited investors will not be subject to compliance with the requirements of segregation of investment advisory and distribution activities provided that the client / investor signs a standard waiver stating the above. Stock broking activity is not considered as a distribution activity.