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01 January 2015

Is Investor is a loser with SEBI’s “Research Analysts” regulation 2014

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

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

Thanks you