I guess this is the first time I am writing a blog on
regulation matter
To protect Investor’s interest SEBI has come out with “Research
Analysts” regulation. Research Analyst will get regulated. From interpretation for words / writing of “Research
Analysts” regulation I feel Investor is a loser
SEBI has come out with below regulations
Year 2013: “SEBI
(INVESTMENT ADVISERS) REGULATIONS”
Year 2014: “SEBI
(RESEARCH ANALYSTS) REGULATIONS”
Concerns about “Research Analysts” regulation have
been written to SEBI on 12 Dec 2014. By the time of writing this blog, I am still
awaiting reply from SEBI
Introducing
myself
I am passionate about stock market since 1993/ 1994. It’s
20+years now
I started investment advisory service in 2011, so it’s 3+
year old
I applied for Investment Advisor registration to SEBI in
2013 (got certificate in 2014)
About interpretation of regulation
I)
Investment Advisor may need to comply “Research
Analysts” Regulation in addition to existing compliance under “Investment
Advisors” Regulation
“Research Analyst” regulation says “Provided further that an investment
adviser, credit rating agency, asset management company or fund manager, who issues research report or
circulates/distributes research report to public or its director or employee
who makes public appearance, shall not be required to seek registration under
regulation 3, subject to compliance of
Chapter III of these regulations. ““
“(w) “research report” means any written or electronic
communication that
includes research analysis or research recommendation or an opinion
concerning
securities or public offer…..”
II) Let’s
discuss further about “Research Analysts” Regulation with real time example
“Research Analysts”
regulation says
“(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.”
“Investment
Advisors” regulation says
(4) An
investment adviser shall disclose to the
client its holding or position, if any, in the financial products or
securities which are subject matter of advice.
Let’s take example
of
Shreyas shipping which declared impressive result on 11-Nov-2014. I guess within
10 minutes of declaration of result, it got upper circuit.
Let us assume
Situation a) if I
(Investment Advisor) had bought on 11-Nov at Rs 95, I can recommend it to my
client on 11-dec at Rs 179. i.e. client
is buying / paying 88% higher price.
Situation b)
i) Technically: if I recommend Shreyas to my client on
11-Nov at Rs 95, I can buy Shreyas on
17-Nov @ 115. (I am assuming 5 days as calendar days and not stock
market trading days).
ii) Practically, it
is likely that I may be getting new clients registered with me every week. May
be two /three weeks I may continue to recommend Shreyas. In that case I will buy Shreyas at very high price
Compliance under
“Investment Advisors” regulation is a win-win situation. I along with clients
/reader of blog can buy the same stock in same period.
I felt
ultimately Investor (May be myself) or Investor (may be Clients / viewer /
reader of blogs) may be a loser with SEBI’s “Research Analysts” regulation
This blog is only an expression of views about regulation.
This is not stock recommendation. Example of Shreyas has been taken to explain implication
of regulation by an example. This is not stock recommendation
You can share your views by way of reply or write me
email at CommunicateAtul@Gmail.com
Thanks you
