The Most Important Terms and Conditions (MITC) are a critical set of disclosures that Research Analysts (RAs) must provide to clients. Standardized by the Industry Standards Forum (ISF) in consultation with RAASB and SEBI, the MITC ensures clients receive key information in a clear and concise format. This article provides a comprehensive technical analysis of the 12-point MITC.
Regulatory Basis
The MITC is specified in the circular dated February 17, 2025 (SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/20) on "Most Important Terms and Conditions (MITC) for Research Analysts."
Key Provisions
- MITC standardized by ISF in consultation with RAASB and SEBI.
- MITC forms part of the Terms and Conditions.
- For existing clients, MITC must be informed via email or suitable communication by June 30, 2025.
- RAs must incorporate MITC into Terms and Conditions and obtain consent.
The 12-Point MITC
Point 1: RA Cannot Execute Trades
"These terms and conditions, and consent thereon are for the research services provided by the Research Analyst (RA) and RA cannot execute/carry out any trade (purchase/sell transaction) on behalf of, the client. Thus, the clients are advised not to permit RA to execute any trade on their behalf."
Explanation: This clarifies that RAs provide research services only. They cannot execute trades on behalf of clients. Clients must execute trades themselves through their broker.
Point 2: Fee Cap and Applicability
"The fee charged by RA to the client will be subject to the maximum of amount prescribed by SEBI/ Research Analyst Administration and Supervisory Body (RAASB) from time to time (applicable only for Individual and HUF Clients)."
Explanation: The fee cap of ₹1,51,000 per annum per family applies to individual and HUF clients only. Non-individual clients and accredited investors are not subject to the cap.
Sub-points:
- 2.1: Current fee limit is ₹1,51,000 per annum per family for all research services.
- 2.2: Fee limit does not include statutory charges.
- 2.3: Fee limits do not apply to non-individual clients/accredited investors.
Point 3: Advance Fee and Refund
"RA may charge fees in advance if agreed by the client. Such advance shall not exceed the period stipulated by SEBI; presently it is one quarter. In case of pre-mature termination of the RA services by either the client or the RA, the client shall be entitled to seek refund of proportionate fees only for unexpired period."
Explanation: Advance fees can be charged up to one year. Upon premature termination, proportionate fees must be refunded.
Point 4: Payment Modes
"Fees to RA may be paid by the client through any of the specified modes like cheque, online bank transfer, UPI, etc. Cash payment is not allowed. Optionally the client can make payments through Centralized Fee Collection Mechanism (CeFCoM) managed by BSE Limited (i.e. currently recognized RAASB)."
Explanation: Cash is prohibited. Cheque, online bank transfer, and UPI are allowed. CeFCoM is an optional, recommended mechanism.
Point 5: Conflict of Interest
"The RA is required to abide by the applicable regulations/ circulars/ directions specified by SEBI and RAASB from time to time in relation to disclosure and mitigation of any actual or potential conflict of interest. The RA will endeavor to promptly inform the client of any conflict of interest that may affect the services being rendered to the client."
Explanation: RAs must disclose and mitigate conflicts of interest. Clients must be promptly informed of any conflicts.
Point 6: No Assured Returns
"Any assured/guaranteed/fixed returns schemes or any other schemes of similar nature are prohibited by law. No scheme of this nature shall be offered to the client by the RA."
Explanation: RAs cannot offer assured, guaranteed, or fixed returns. Such schemes are prohibited by law.
Point 7: No Guarantee of Returns or Accuracy
"The RA cannot guarantee returns, profits, accuracy, or risk-free investments from the use of the RA's research services. All opinions, projections, estimates of the RA are based on the analysis of available data under certain assumptions as of the date of preparation/publication of research report."
Explanation: RAs cannot guarantee returns, profits, accuracy, or risk-free investments. Recommendations are based on analysis and assumptions.
Point 8: Market Risks and No Recourse
"Any investment made based on recommendations in research reports are subject to market risks, and recommendations do not provide any assurance of returns. There is no recourse to claim any losses incurred on the investments made based on the recommendations in the research report. Any reliance placed on the research report provided by the RA shall be as per the client's own judgement and assessment of the conclusions contained in the research report."
Explanation: Investments are subject to market risk. RAs provide no assurance of returns. There is no recourse for losses. Clients must use their own judgment.
Point 9: Registration Does Not Guarantee Performance
"The SEBI registration, Enlistment with RAASB, and NISM certification do not guarantee the performance of the RA or assure any returns to the client."
Explanation: Registration, enlistment, and certification are not guarantees of performance or returns. They only indicate regulatory compliance.
Point 10: Grievance Redressal Steps
"For any grievances, Step 1: the client should first contact the RA using the details on its website or following contact details: (RA to provide details as per 'Grievance Redressal / Escalation Matrix') Step 2: If the resolution is unsatisfactory, the client can also lodge grievances through SEBI's SCORES platform at www.scores.sebi.gov.in Step 3: The client may also consider the Online Dispute Resolution (ODR) through the Smart ODR portal at https://smartodr.in"
Explanation: Three-step grievance process: RA → SCORES → ODR.
Point 11: Update Contact Details
"Clients are required to keep contact details, including email id and mobile number/s updated with the RA at all times."
Explanation: Clients must keep their contact details updated.
Point 12: Do Not Share Login Credentials
"The RA shall never ask for the client's login credentials and OTPs for the client's Trading Account Demat Account and Bank Account. Never share such information with anyone including RA."
Explanation: RAs never ask for login credentials, passwords, or OTPs. Clients must never share this information.
Compliance Requirements
1. MITC Disclosure
RAs must disclose MITC to all clients.
2. MITC Integration
MITC must be integrated into Terms and Conditions.
3. Consent Collection
RAs must obtain client consent on MITC.
4. Communication
For existing clients, MITC must be communicated by June 30, 2025.
5. Record Keeping
RAs must maintain records of MITC disclosure and consent.
Common Compliance Gaps
1. Not Including MITC in Terms
Some RAs do not include MITC in Terms and Conditions.
Solution: Integrate MITC into Terms and Conditions.
2. Not Obtaining Consent
Some RAs do not obtain client consent on MITC.
Solution: Obtain consent before providing services.
3. No Grievance Redressal Contact Details
Some RAs do not provide contact details in MITC.
Solution: Provide complete contact details for grievance redressal.
4. Delayed Communication for Existing Clients
Some RAs delay communicating MITC to existing clients.
Solution: Communicate MITC by June 30, 2025.
Conclusion and How Anuj Desai & Associates Can Help
The 12-point MITC is a critical compliance requirement for RAs. Proper disclosure and consent collection are essential.
Anuj Desai & Associates offers specialized services to help RAs comply with MITC requirements:
- Review of MITC documentation.
- Integration of MITC into Terms and Conditions.
- Assistance with consent collection.
- Compliance audit and advisory.
Contact us today to ensure your MITC complies with SEBI requirements. Our team will review your documentation and provide a tailored compliance roadmap.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.