All provisions of Chapter II, III, IV, V, and VI of the RA Regulations apply to proxy advisers on a mutatis mutandis basis. This ensures that proxy advisers are subject to the same regulatory framework as Research Analysts. This article provides a comprehensive technical analysis of this applicability.
Regulatory Basis
Primary Provision: Regulation 23(1)
Regulation 23(1) provides that:
"All the provisions of Chapter II, III, IV, V and VI shall apply mutatis mutandis to the proxy adviser."
Meaning of "Mutatis Mutandis"
Definition
Mutatis mutandis means "with the necessary changes having been made." It indicates that the provisions apply to the new context with appropriate modifications.
Implication
All provisions of Chapters II, III, IV, V, and VI of the RA Regulations apply to proxy advisers, with necessary modifications to fit the proxy adviser context.
Applicable Chapters
Chapter II: Registration of Research Analysts
Provisions:
- Regulation 3: Application for grant of certificate
- Regulation 4: Issuance of research report by persons outside India
- Regulation 5: Furnishing of further information
- Regulation 6: Consideration of application and eligibility
- Regulation 7: Qualification and certification requirement
- Regulation 8: Deposit requirements
- Regulation 9: Grant of certificate of registration
- Regulation 10: Period of validity
- Regulation 11: Renewal of certificate
- Regulation 12: Procedure where registration is refused
- Regulation 13: Conditions of certificate
- Regulation 14: Recognition of body for administration and supervision
Chapter III: Management of Conflicts of Interest and Disclosure Requirements
Provisions:
- Regulation 15: Establishing internal policies
- Regulation 15A: Fees
- Regulation 16: Limitations on trading
- Regulation 17: Limitations on compensation
- Regulation 18: Limitations on publication
- Regulation 19: Disclosures in research reports
- Regulation 19A: Website
- Regulation 20: Contents of research report
- Regulation 21: Recommendations in public media
- Regulation 22: Distribution of research reports
- Regulation 23: Additional disclosures by proxy adviser
- Regulation 24: General responsibility
Chapter IV: Inspection
Provisions:
- Regulation 27: Board's right to inspect
- Regulation 28: Notice before inspection
- Regulation 29: Obligation of RA on inspection
- Regulation 30: Submission of report
- Regulation 31: Action on the inspection report
Chapter V: Procedure for Action in Case of Default
Provisions:
- Regulation 32: Liability for action in case of default
Chapter VI: Miscellaneous
Provisions:
- Regulation 33: Power to issue clarifications
- Regulation 34: Power of Board over recognized body
Applicability Summary
| Chapter | Provisions | Applicability to PAs |
|---|---|---|
| II | Registration | Yes |
| III | Conflict of Interest and Disclosures | Yes |
| IV | Inspection | Yes |
| V | Default Action | Yes |
| VI | Miscellaneous | Yes |
Specific Modifications for PAs
1. Qualification
Employees of proxy advisors shall be required to have a minimum qualification of being a graduate in any discipline.
2. Certification
Certification requirements for employees of proxy advisors shall be as specified by the Board.
3. Capital Adequacy
Time period for compliance with capital adequacy for proxy advisors shall be three years.
4. Additional Disclosures
Proxy advisers shall additionally disclose:
- Extent of research involved
- Policies and procedures for interacting with issuers
5. Record of Voting Recommendations
Proxy advisers shall maintain the record of their voting recommendations.
Common Compliance Gaps
1. Not Applying RA Regulations
Some PAs do not apply RA Regulations.
Solution: Apply all applicable provisions.
2. Overlooking Specific Modifications
Some PAs overlook specific modifications.
Solution: Apply provisions with necessary modifications.
3. Not Making Additional Disclosures
Some PAs do not make required additional disclosures.
Solution: Make all required disclosures.
Conclusion and How Anuj Desai & Associates Can Help
The mutatis mutandis application ensures regulatory consistency for PAs.
Anuj Desai & Associates offers specialized services to help PAs comply with RA Regulations:
- Understanding applicability
- Compliance with provisions
- Additional disclosure support
- Compliance audit and advisory
Contact us today to ensure your proxy adviser compliance is in order. Our team will guide you through the process.
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.