The "fit and proper person" criteria is a fundamental requirement for registration as a Research Analyst under the SEBI (Research Analysts) Regulations, 2014. Understanding the criteria and maintaining compliance is essential for RAs seeking registration and continued registration.
The Regulatory Requirement
Inclusion in RA Regulations
Regulation 6(vii) of the RA Regulations requires that the applicant, individuals employed as research analyst, persons associated with research services, and partners of the applicant, if any, are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
Ongoing Obligation
The fit and proper person criteria must be maintained at all times, not just at the time of registration.
Schedule II Criteria
Clause 1: General Criteria
The person must:
- Integrity: Have integrity
- Honesty: Be honest
- Ethical Behaviour: Exhibit ethical behaviour
- Reputation: Have good reputation
- Fairness: Be fair
- Character: Have good character
Clause 2: Additional Criteria
The person must not be:
- Convicted: Convicted of any offence involving moral turpitude
- Restrained: Subject to any order of restraint, prohibition, or debarment by SEBI
- Insolvent: Declared insolvent
- Of Unsound Mind: Found to be of unsound mind
- Wilful Defaulter: Categorized as a wilful defaulter
- Fugitive Economic Offender: Declared a fugitive economic offender
Specific Disqualifications
The criteria specifically address:
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Criminal Complaints: No criminal complaint or information under section 154 of the Code of Criminal Procedure, 1973 has been filed by the Board and is pending
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Conviction: No order of conviction has been passed by a court for any offence involving moral turpitude
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Winding Up: No winding up proceedings have been initiated or an order for winding up has been passed
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Insolvency: The person has not been declared insolvent
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Unsound Mind: The person has not been found to be of unsound mind
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Disqualification: The person has not been declared as not fit and proper person by an order of the Board
Application to Research Analysts
For Individual RAs
Individual RAs must:
- Meet Criteria: Meet all fit and proper person criteria
- Maintain Status: Maintain fit and proper person status
- Disclose Changes: Disclose any change in status
For Non-Individual RAs
Non-individual RAs must ensure:
- **Company: The company meets the fit and proper person criteria
- **Directors: All directors meet the fit and proper person criteria
- **Key Persons: Key management personnel meet the criteria
- **Promoters: Promoters or persons holding controlling interest meet the criteria
For Research Entities
Research entities must ensure:
- **Entity: The research entity meets the criteria
- **Individuals Employed: Individuals employed as research analysts meet the criteria
- **Partners: Partners meet the criteria
- **Key Management: Key management personnel meet the criteria
Declaration Requirements
At Registration
Applicants must provide a declaration that:
- Compliance: They comply with fit and proper person criteria
- No Disqualification: They do not incur any disqualifications
- Fit and Proper Status: They are fit and proper persons
Ongoing
RAs must:
- Maintain Compliance: Continue to meet fit and proper person criteria
- Report Changes: Report any change in status to SEBI/RAASB
- Renew Declarations: Provide updated declarations as required
Declaration Cum Undertaking for Change in Control
For Change in Control
When seeking prior approval for change in control, a declaration cum undertaking must be provided confirming:
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Fit and Proper: The applicant and its principal officer, directors, managing partners, compliance officer, key management persons, promoters, and persons holding controlling interest are fit and proper persons
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No Disqualifications: They do not incur disqualifications mentioned in Clause 3(b) of Schedule II
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Specific Confirmations: Specific confirmations regarding criminal complaints, convictions, restraint orders, recovery proceedings, winding up, insolvency, unsound mind, wilful defaulter, and fugitive economic offender status
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No Association with Vanishing Companies: Not associated with vanishing companies
Consequences of Non-Compliance
Registration Rejection
Failure to meet fit and proper person criteria can result in:
- Application Rejection: Rejection of registration application
- Registration Suspension: Suspension of existing registration
- Registration Cancellation: Cancellation of existing registration
Enforcement Action
Non-compliance can result in:
- Enforcement Action: Action by SEBI
- Penalties: Monetary penalties
- Debarment: Debarment from the securities market
Expert Legal Guidance
Anuj Desai & Associates provides expert legal services for Research Analysts on fit and proper person criteria compliance. Our securities law experts help RAs understand the criteria, conduct self-assessments, and maintain compliance. We assist in preparing declarations, responding to regulatory inquiries, and addressing any disqualification issues.