A common misconception about the SEBI (Research Analysts) Regulations, 2014 is that they cover only equity and equity-linked securities. This is incorrect. The regulations apply to all securities as defined under Indian securities laws, requiring Research Analysts to understand and comply with the full scope of securities covered.
The Definition of Securities
Under the RA Regulations
Regulation 2(1)(x) of the RA Regulations defines "securities" as securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.
Under the SCRA
Clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 defines "securities" to include:
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Shares: Shares, scrips, stocks, bonds, debentures, debenture stock, or other marketable securities of a like nature in or of any incorporated company or other body corporate
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Government Securities: Government securities
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Derivatives: Derivatives
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Units: Units or any other instrument issued by any collective investment scheme
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Security Receipts: Security receipts
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Modaraba Units: Modaraba units
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Mutual Fund Units: Mutual fund units
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Any Other Instruments: Any other instruments as may be declared by the Central Government to be securities
Implications for Research Analysts
Equity and Equity-Linked Securities
While equity and equity-linked securities are clearly covered, the scope extends well beyond:
Debt Securities
Research Analysts providing research on:
- Corporate Bonds: Corporate bonds and debentures
- Government Securities: Government and public sector securities
- Commercial Paper: Short-term debt instruments
- Securitized Instruments: Securitized debt instruments
Derivatives
- Futures: Futures contracts on various underlying assets
- Options: Option contracts on equity, indices, commodities
- Swaps: Interest rate swaps, currency swaps
- Options: Credit default swaps and other credit derivatives
Mutual Fund Units
Research on:
- Equity Funds: Equity mutual fund schemes
- Debt Funds: Debt mutual fund schemes
- Hybrid Funds: Hybrid mutual fund schemes
- ETF Units: Exchange Traded Fund units
Collective Investment Schemes
Research on collective investment scheme units and other similar instruments
Commodity Derivatives
With the integration of commodity derivatives regulation, research on commodity derivatives is also covered
Practical Application
For Existing RAs
Research Analysts should ensure:
- Comprehensive Coverage: Their registration covers all securities they research
- Methodology Agnostic: Research is covered regardless of methodology
- All Asset Classes: All asset classes are covered, not just equity
For New Applicants
Applicants should:
- Scope Definition: Define the scope of securities they will research
- Infrastructure: Ensure infrastructure for research on covered securities
- Compliance: Ensure compliance for all covered securities
Technical Analysis and Methodology
Methodology Agnostic
The RA Regulations are agnostic to the methodology used to provide research services. Providing research services (including buy/sell/hold recommendation) on a security or securities based on any methodology (including technical analysis) is not exempted from the purview of the RA Regulations.
Exceptions
The only exception is technical analyses relating to the demand and supply for a particular sector or index, which is exempted from the purview of RA Regulations.
Exempted Intermediaries
Investment Advisers
Investment Advisers registered under IA Regulations are exempt from RA registration if they are issuing research reports or research analysis only for their clients
Credit Rating Agencies
Credit Rating Agencies are exempt from RA registration if they are issuing research reports or research analysis only for their clients
Asset Management Companies
Asset Management Companies are exempt from RA registration if they are issuing research reports or research analysis only for their clients
Fund Managers
Fund Managers are exempt from RA registration if they are issuing research reports or research analysis only for their clients
However, in case such intermediaries issue/circulate/distribute research reports to public or general investors and/or if they or their directors or employees make public appearance, they shall be required to comply with Chapter III of the RA Regulations.
Key Clarifications
Research Entity Definition
"Research entity" means an intermediary registered with Board who is also engaged in merchant banking or investment banking or brokerage services or underwriting services and issue research report or research analysis in its own name through the individuals employed by it as research analyst and includes any other intermediary engaged in issuance of research report or research analysis.
Coverage of All Securities
RA Regulations cover all securities as defined under clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956, not just equity and equity-linked securities.
Expert Legal Guidance
Anuj Desai & Associates provides expert legal services for Research Analysts on understanding and complying with the full scope of securities covered under RA Regulations. Our securities law experts help RAs determine the scope of securities they can research, ensure compliance for all covered securities, and navigate the regulatory landscape.