You are passionate about stock markets and your research on companies. You have your own blog where you write about various listed companies, their stock price targets, etc.
While the subscription to your blog is free, you get several queries seeking advice about investing in stocks, buy/sell/hold, etc., which you diligently respond to. In fact, several of your readers are willing to pay you a fee for your service and advice.
But since you have read SEBI (Research Analyst) Regulations, 2014, you are afraid that SEBI is out there to put a “STOP” sign on your passion. It was not just a passion but something that you believed would lead to the famous “second income” for you.
What to do now?
Does that read like your story?
Don’t worry. You are not alone.
I have personally observed that individuals are not clear whether their research activity comes under the purview of SEBI Research Analyst (RA) Regulations or not.
Although SEBI has specified what is NOT a “Research Report”, people are still unsure about its interpretation.
Here I will try and make it easy for you to understand. Read on!
The two key definitions that we need to consider to decide the scope of the RA regulations are that of “research reports” and “research analyst”.
What is a research report?
A research report means any written or electronic communication that includes research analysis or research recommendation or an opinion concerning securities or public offer, providing a basis for an investment decision.
Who is a research analyst?
A research analyst is a person who is primarily responsible for preparation of research report, making buy / sell / hold recommendations on stocks, mutual funds, bonds, debentures, derivatives and other securities, giving price targets and views on securities.
So, what is covered under Research Analyst (RA) Regulations?
Briefly, you should consider the following areas while deciding whether the RA regulations apply to you or not:
- if you are giving buy / sell / hold recommendations on stocks, mutual funds, bonds, debentures, derivatives, government securities.
- if you have primary responsibility for providing research reports
- if you are engaged in preparation and publication of content of research reports
- if you give price targets on stocks
- if you give views on IPO or NFO
- if you are a merchant banker or investment banker or a broker and also issue research reports
- if you directly or indirectly report to a research analyst or help a research analyst in writing research report or giving price targets
What does not fall under RA regulations?
Here are some of the exemptions to RA regulations:
- Giving buy / sell / hold recommendations on unlisted securities
- Being a marketing personnel or a back office assistant who is involved in publication or formatting a research report
- Giving general views on the market or any industry or sector
- Giving statistical summaries of the financial data of the company
- Presenting financial data of the company, which is publically available in an easy to understand manner
- Giving technical analysis relating to demand and supply in a sector or the index
- Giving recommendations on spot commodities
- Giving views on broad-based indices
Additionally, the following activities are not covered under Research Analyst Regulations in case of companies:
#1 – Giving periodic reports or other communications prepared by a mutual fund or by alternative investment fund or by portfolio managers or by investment advisers for their clients.
#2 – Circulating documents like offer documents or prospectus that are required as per regulations made by the Board.
#3 – Sending internal communications to employees or group companies that are not given to current or prospective clients.
#4 – Giving training or conducting workshops on how to research on stocks or how to invest in stock market.
To understand the applicability of RA regulations better, here are few case questions:
Q1 – I give investment advice to my clients. I also provide them research reports on the funds / stock recommended to them. Do I have to get registered as a Research Analyst?
A: You have to get registered as an Investment Adviser with SEBI. Once you register as Investment Adviser, you need not get registered as a Research Analyst. However, you need to comply with Chapter III of the Research Analyst Regulations.
Q2 – I have a blog where I write on trends in a specific sector like banking sector, IT sector etc. In my articles I do specify company names. Do I fall under Research Analyst Regulations?
A: No, writing on general trends of the market do not fall under the RA regulations. If you specify company names as examples, you can continue to do so without getting yourself registered.
Q3 – I provide research analysis for free on my blog. Should I get myself registered?
A: It is not specifically mentioned about the service being free or paid. Hence, to take a conservative view, I would recommend that you should get yourself registered as a Research Analyst.
Q4 – My company is planning to provide mutual fund research services. It has hired an individual Research Analyst to provide research services and research recommendations to the company. The individual is registered with SEBI. Does my company need to get registered with SEBI?
A: In my view, YES the Company needs to get registered with SEBI since it is providing research services to its client.
Q5 – I give lectures to students on how to pick a stock. I teach technical and fundamental analysis. I also conduct workshops in different cities on the same. Should I register with SEBI as Research Analyst?
A: No, you need not get registered with SEBI since you are not giving any advice or recommendations on any security.
Disclaimer: The above stated views and interpretation are my own. In no form or manner should it be considered as SEBI’s views. You are requested to contact SEBI for any queries with regards to your particular case.
Hi, I’m a finance blogger and i write technical analysis about the stock. In that i will show the breakout and near resistance. Do i need to register with SEBI?
And i’m a software engineer, is it possible to register as RA?
Hi Munna, do you charge for providing technical analysis? Will giving breakout and resistance help investors do transactions in stocks? If yes, then you will have to get registered with SEBI.
If you have mimimum 5 years of working experience along with your engineering degree, then you fulfill the qualification requirements.
You will also need NISM Series XV certification.
Hi Kruti,
If RA provides buy/sell call on F&O, what is the SEBI policy if RA also is interested to take the same F&O trade?
As F&O have monthly expiry, how can the RA adhere to rule no. 16.2 or is 16.2 applicable only for Equity (cash) stocks ??
16.2 – “Independent research analysts, individuals employed as research analyst by research entity or their associates shall not deal or trade in securities that the research analyst recommends or follows within thirty days before and five days after the publication of a research report.”
Regards
Sanket D
Hi Sanket, SEBI regulations are same for providing buy / sell on any security be it stocks or F&O.
Thank you for your reply.
Hello CS Kruti thank you so much for the excellent analysis.
I would like to do field research on listed and unlisted companies and present that insights to value investors, VC firms and PE firms etc.
Field research includes visiting to factories, talking to managers, suppliers, distributors and customers etc.
Just like screener.com where as, it provides only financial data (quantitative data) but i would like to provide qualitative data.
Do i need to get registered as a research analyst?
Thanking you in advance.
Hi. Thank you for your feedback. In my view, if you are going to present the facts about a company and will not be showcasing your own analysis about the company then you need not get registered as a RA.
Hello Kruti,
1. We have a technical analysis chart indicator which gives out Buy/Sell indications for Nifty and BankNifty only and not individual stocks. It will be a paid indicator.
Do we need to get registered with SEBI?
2. In the future, if we modify the above indicator to give out technical analysis Buy/Sell for individual stocks, then in that scenario, would we need to get registered ?
Kindly explain and clear the confusion.
Thanking you in advance.
Aj
Hi, in my view, if the indicator gives buy / sell calls on stocks and derivatives you will have to get registered with SEBI.
Hi. Thanks for the amazing article! I teach about the stock market and teach valuation as well. But do not give buy/sell recommendations. Also I put some company data analysis on social media. Do i need to get registered as a research analyst?
Hi. Does the company data analysis provides for future analysis and provides a basis for investment decision? If yes, then it may come under RA regulations.
hi can you please tell me that RA certification is necessary for commodities?
Hi. I would request you to go through this – https://cskruti.com/is-sebi-registration-required-for-commodities-research/
Hi Kruti, wanted to check if the analysts hired by a PMS firm need to have this certification?
Hi Vidhi, if you mean whether you will require SEBI RA license since you have hired the analysts too, then, in my view, it is not reuqired since periodic reports or other communications prepared for clients of portfolio managers is exempted.
Having said that, it is a good governance if all the research analysts get the NISM certification.
Can Research analyst provide buy/sell recommendation to the clients in stocks,commodities and currencies.
To the bulk customers
Yes, an RA can provide recommendations in stocks, commodities and currencies.
Can I get both RIA and RA license? I am a CFA charter holder by qualification.
In the past SEBI has given both the licenses to individuals. However, request you to get in touch with SEBI’s local / regional office near you.
Madam if I share probability of winning of call Writting based on history so should I need research analyst registration or any other registration.
Hi. Can you share more information over email to kruti@cskruti.com
Thanks for this article. Informative.
Very useful information , available only on your blog. Very good work ma’m.
God bless you .
Thank you Vicky.
Thanks
Hello Ma’am! Hope you are staying Safe & Well! I wanted to understand whether a broker or a sub-broker can be parallelly a research analyst. Can a broker or sub-broker who has a RA license charge for stock research /recommendations also? Or is it barred by SEBI?
Hi Aaditya, SEBI will not allow you to be a research analyst as well as broker at the same time as SEBI sees this as a conflict of interest.
Hi, Can you please share the specific regulation or FAQ that prohibits this as I could not find it. Thank you
There are provisions in the regulations about managing conflict of interest. Please see chapter 3 of the regulations.
I am designing a paid course on Trading psychology in which I discuss mindset, risk management, and how to execute trades and maintain trading journal etc. I won’t discuss particular script, neither suggest buy or sell any security. For the sake of example I want to show candlestick charts for particular trade setup without mentioning the name of it. I am not SEBI registered and not proficient in analysis as analyst. Can I conduct such courses? What is your suggestion to safely and legally doing it? I wish to earn from the course. I am university teacher in engineering. Teach yoga and meditation as well.
Yes, you can go ahead and conduct such courses without SEBI registration. Pls make sure that you give a disclaimer that the course if for education purpose only and the strategy and charts are used only as examples.
Hi Kruti,
Thanks for this article. Just wanted to understand, I am writing a finance blog/newsletter, and I talk about individual companies, basically their past performance ( revenue growth, ROCE, capex etc.) and future prospects for their business ( positives and negatives in their business segments) , I DONOT talk about stock price and valuations, DONOT give buy/sell recommendations either. The articles are currently free but I plan to start a subscription model later. Would this be considered “research reports” and thus am I required to register.
Thanks
Hi Bryan, if your newsletter contains information which is already in the market or are statistical summaries of financial data of the companies, then you need not get registered with SEBI as a RA.
Hi Kruti
Are Sebi registered research analyst allowed to give recommendations in index futures and options if they are doing trading in the same instruments?
Hi Rohit, do you mean to ask, can RA trade in futures and options if they are recommending the same? RA are allowed to give recommendations on securities. Derivatives is included in the word securities. So, if RA are recommending such securities, they have to follow the restrictions on personal trading of RA as mentioned in the RA regulations.
If RA are not allowed to trade, when WHY there is Discourse norms?
There is a restriction on trading days and not on overall trading. RAs can trade in securities not recommended to the clients.
Hello Kruti,
1. We have a technical analysis chart indicator which gives out Buy/Sell indications for Nifty and BankNifty only and not individual stocks. It will be a paid indicator.
Do we need to get registered with SEBI?
2. In the future, if we modify the above indicator to give out technical analysis Buy/Sell for individual stocks, then in that scenario, would we need to get registered ?
Kindly explain and clear the confusion.
Thanking you in advance.
Ajay
Hello Kruti.. thank you so much for the excellent analysis.
I have a query on the below exempted activity
Sending internal communications to employees or group companies that are not given to current or prospective clients.
The text in the regulation does not cover “or group companies”. Is there any clarification or definition clarifying the same?
Many thanks for your help
Hi Amit. There is no clarification. It basically means that if it for internal communication only then it is not considered as a research report.
Can two Individual either my signing MOU or partnership deed start trading together. One partner is investing another is using skill (partner in profit). Is SEBI can interfere int his as mutually agreed. ?
Hi Manish, SEBI might not interfere if it is on a small scale and only between the two individuals. However there is no written rule that it is allowed or not allowed.
Hi Kruti thanks for your reply.
what is the meaning of PAN Card (Certified True Copy). is it self certified or notarized by a lawyer. and individual RA is necessary to hire 1 person for back office support.
Hi Kapil. It means self-certification. For Individual RA it is not necessary / mandatory to hire back office support.
I am a Sub broker. i have deposited rs 100,000 security. Is it consider in my net worth.
If the money is refundable, then you can consider it as asset in your networth.
Thanx a lot you solved by big confusion .
Is doing freelancing as a mentor in stock market by giving trainings one to one basis through skype etc attract any registration with SEBI?
Is have to register under Gst if income below 20 lakhs?
In nut shell what kind of legal formalities required?
Hi Manish, giving training or conducting workshops to educate people do not require SEBI registration unless you are giving any recommendations / investment advice. I am not an expert on GST related topics and hence cannot answer your query on GST.
Hi,
I have some doubts
1. Research report through RA can be send to non PMS Clients?
2. Research report can be given to a person who is client of a company but not broking client.
Hi. Can you pls give me more details about your business and your query. Are you registered with SEBI as an intermediary?
Thank you very much for the help.
Yes I will charge some amount, I will only tell how to choose stocks using chart, I will not tell specific stock name.
And it will purely based on chart. When to sell and buy on intraday basis only.
If you are not going to give out stock names, then you need not get registered with SEBI.
Can I sell my trading strategy, without sebi registration.
Hi Kiran. Are you going to charge for the same? Are you going to mention the process on how you select stocks or also going to give out names of the stocks? If you are going to give out names of the stocks then you need to get registered with SEBI, in my view.
Very comprehensive understanding of the RA regulation! Thanks Kruti for writing this.
Thanks for your feedback Vipin!