SEBI, by way of its Circular dated May 2, 2024 (‘Circular’), has provided that stock exchanges will be recognised as Research Analyst Administration and Supervisory Body (‘RAASB’) and Investment Adviser Administration and Supervisory Body (‘IAASB’) under Regulation 14 of the SEBI (Research Analysts) Regulations, 2014 (‘RA Regulations’) and SEBI (Investment Advisers) Regulations, 2013 (‘IA Regulations’), respectively subject to fulfilment of certain criteria specified in the Circular. An indicative list of the key criteria include: (i) minimum existence of 15 years as a stock exchange; (ii) minimum net-worth of INR 200 crores (approx. US$ 23 million); (iii) presence of nationwide terminals; and (iv) stock exchanges having Investor Service Centres in at least 20 cities.

Following recognition as RAASB/IAASB, such stock exchange will be required to: (i) amend its memorandum and articles of association and bye-laws to include provisions to fulfil its roles and responsibilities as a RAASB/IAASB; (ii) maintain necessary infrastructure for effective discharge of its responsibilities; (iii) implement systems/processes for maintaining database of Research Analysts (‘RAs’)/ Investment Advisers (‘IAs’), sharing information with SEBI; and (iv) constitute an internal committee to oversee activities of administration and supervision of RAs and IAs. The provisions of the Circular will come into effect from July 25, 2024.

The Circular clarifies that while SEBI will retain the core functions of registration, enforcement action, and disciplinary or penal action, certain functions will be performed concurrently by SEBI and RAASB/IAASB:

i.    the IAASB/RAASB will undertake the initial scrutiny of applications for fresh registrations, change of control applications, for ensuring completeness of submission of information/ documents along with recommendation on the applications to SEBI, initial scrutiny of certain post-registration applications, approval of advertisements of RAs/IAs, maintenance of database of RAs/IAs; and

ii.   the IAASB/RAASB will monitor activities of IAs/RAs through annual compliance audit reports and other period/ad-hoc reports covering general details of RAs/IAs, grievance redressal and online dispute resolution, taking administrative action including imposition of penalties and issuing warning letter, referring to SEBI for enforcement action against RAs/IAs.

Further, in order to provide ease of doing business and to ensure smooth operationalisation of RAASB and IAASB framework and to prevent disruption for existing RAs and IAs registered with SEBI, existing SEBI-registered RAs will be automatically enlisted with RAASB whereas existing SEBI-registered IAs who are also BSE Administration and Supervision Limited (‘BASL’) (which is currently recognised as IAASB) members will be deemed to be enlisted with IAASB. RA registration applications received and under process with SEBI up to the effective date of operationalisation of RAASB will continue to be processed by SEBI and will be deemed enlisted with RAASB upon registration. Similarly, IA registration applications received and under process with SEBI/BASL up to the effective date of operationalisation of IAASB will continue to be processed by SEBI/BASL and will be deemed enlisted with IAASB upon registration. New applications received from the effective date of operationalisation of RAASB/IAASB framework will be routed through RAASB/IAASB. In such cases, enlistment with RAASB/IAASB will be a pre-requisite for grant of certificate of registration as RA/IA by SEBI.