Why SEBI Rules on Research Analysts Ease Entry Barrier But Raise Stakes

These new obligations seem to impose an excessive compliance burden on RAs

- Shivaang Maheshwari

Recent changes by the Securities and Exchange Board of India (Sebi) to the regulatory framework governing research analysts (RAs) reflect a mix of progressive and regressive measures. One of the notable changes is the relaxation of eligibility criteria, which may seem like a welcome step. However, the new framework imposes burdensome obligations that could hinder RAs' ability to operate effectively.

The minimum qualification requirement for an individual RA or a principal officer of a non-individual RA has been reduced to a graduate degree in a finance-related field. Additionally, the previous requirement of five years of experience in securities-related activities has been completely removed.

While this change lowers entry barriers for an individual seeking registration as an RA, it also raises concerns about the research quality provided by them, as individuals with only a finance-related graduate degree can now register with Sebi and issue research reports without any prior experience in the securities market. A more balanced approach might have been to introduce a reduced but reasonable experience threshold instead of its outright elimination.