Sebi Releases Framework For Stock Exchanges To Supervise Investment Advisers

Sebi a new framework for stock exchanges to be enlisted as RAASB or IAASB and then oversee research analysts and investment advisers. Read how they monitor Investment advisors.
Sebi a new framework for stock exchanges to be enlisted as RAASB
Sebi a new framework for stock exchanges to be enlisted as RAASB

The Securities and Exchange Board of India (SEBI) on May 2, 2024, released a framework for the supervision of Research analysts (RAs) and Investment Advisers (IAs) by stock exchanges. The move lays down how stock exchanges will be authorised to take this role and thus aims to formalise the regulatory aspects of Sebi intermediaries in the financial market.

In the circular, Sebi outlined the criteria for a stock exchange to obtain recognition as a Research Analyst Administration and Supervisory Body (RAASB) or Investment Adviser Administration and Supervisory Body (IAASB). The new provisions will be effective from July 25, 2024.

To be eligible for recognition as RAASB or IAASB, a stock exchange must have been operational for at least 15 years and possess a net worth of at least Rs 200 crore. Further, they should maintain terminals all over India and investor service centres in 20 cities. They should maintain maintain necessary infrastructure like adequate office space, equipment and manpower and should have a robust grievance redressal mechanism, including online dispute resolution.

How RAs And IAs Be Supervised?

An applicant seeking registration as RA and IA is required to be enlisted with stock exchanges RAASB or IAASB.

Under the new framework, RAASB and IAASB are tasked with monitoring the financial and regulatory compliance side of RAs and IAs. They should obtain the Annual Compliance Audit Report and other periodic reports from RAS or IAs, which cover general details of RAs/IAs, details of customer complaints, details of clients, etc.

Further compliance with Sebi regulations and circulars should be ensured, and stock exchanges should monitor the handling of customer complaints, grievance redressal and Arbitration/ Online Dispute Resolution (ODR). They can administer penalties and issue warnings or cautionary letters when necessary. Finally, IAASB or RAASB can refer cases to SEBI for enforcement actions against RAs and IAs.

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