SEBI's research-analyst hiring spree to make investment more transparent in India

After markets watchdog Sebi made it mandatory for market research analysts to get registered with it from December 2014, the number of such persons/ entities rose to 121 till date, according to official data. Till December 1, 2014, market research analysts were operating as unregistered and unregulated entities and there were instances of them misguiding investors. While the number stood at just two in January this year, it tose to 121 as of end July.

According to the Sebi data, there are 121 authorised research analysts providing reports and services related to the securities market. Morgan Stanley India Company, Edelweiss Securities, Barclays Securities, Angel Broking, Religare Capital Markets are some of the entities authorised to provide services as research analysts. The regulator made registration mandatory to safeguard investors from misleading advice from unregulated entities and the new norms came into force from December 1, 2014.

The norms help in regulating research analysts and those entities that make recommendations related to securities and public offers such as brokerage houses, merchant bankers and proxy advisors. As per the Sebi data, two entities had obtained Sebi approval to operate as research analysts at the end of January, which rose to 10 by end-February. Subsequently, it rose to 26 by end-April and further to 55 at the end of June. The number of registered research analysts since then has more than doubled to 121. However, no data on research analysts are available prior to January 2015.

Under these regulations, foreign entities acting as research analysts for domestic markets or India listed companies need to tie up with a locally incorporated registered entity, while domestic players are also be subjected to strict disclosures and scrutiny. The norms, which also cover 'proxy' advisors or those providing advisory services similar to research analysts, were framed following various instances of 'mischievous' research reports getting circulated among investors to manipulate market trends or share price of individual companies.

Every individual/entity desiring to function as a research analyst has to get Sebi registration and meet a set of conditions like capital adequacy, setting up firewalls against conflict of interest, timely disclosures, etc. However, investment advisers, credit rating agencies, portfolio managers, AMCs, fund managers of alternative investment funds or VCs are not be required to be registered under these regulations.

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