Navigating SEBI’s Ease of Doing Business Reforms for Investment Advisors and Research Analysts

By Manya Bansal

Introduction

The Securities and Exchange Board of India (“SEBI“) is recalibrating the regulatory framework of the SEBI (Investment Advisers) Regulations, 2013 (“IA Regulations“) and SEBI (Research Analysts) Regulations, 2014 (“RA Regulations“). It started by proposing Ease of Doing Business for Investment Advisers (“IA“) and Research Analysts (“RA“), and partially approving the proposal in the September 2025 SEBI Board Meeting. The reform aims to shift from a stringent regulatory compliance to a more flexible, technology-driven regime that promotes ease of doing business while balancing investor protection. Wherein the approved proposal includes disclosure of past performance on a one-to-one basis, enabling second-opinion services to the clients, alleviating registration guidelines and educational mandates, and streamlining corporatization timelines. This comprehensive overhaul reflects SEBI’s strategy in reforming investor protection while ensuring a broader vision of ensuring ease of doing business.

Key Amendments

Past Performance Disclosure

In a major shift from its past narrative, SEBI has changed its stance on banning the sharing of its investment performance data. Under the approved framework, past performance data to clients on a one-on-one basis, without its publication, will be allowed only upon the client’s specific request. Illustratively, for portfolio management divisions like Motilal Oswal PMS, they could share their verified five-year performance data, including fees and equity strategy, to secure a prospective high-net-worth client. However, the approved proposal entails specific parameters to accomplish this. They should be mandatorily certified by a member of ICAI/ICMI only for two years to the effect of the Past Risk and Verification Agency (“PaRRVA“) followed by a public statement that it is not approved by any government agency. However, after PaRRVA is operationalized, the performance data will only be verified by risk and return metrics.

Second-Opinion Services and Relaxing Corporatization

Under the previous regime, IAs were not allowed to give second opinions on pre-distributed assets, even if desired by clients, due to scenarios of dual charging for assets and conflict of interest. Though the Board has approved SEBI’s proposal to permit second-opinion services but it is mandatory to obtain annual explicit consent from the clients. In addition to the advisory fee they can also charge a capped fee of 2.5% per annum of assets under advice. under Regulation 13 of the IA Regulations IAs upon crossing 300 clients or 3 crore INR required them to go through complete corporatization and seek in-principle approval as a non-individual IA. Whereas, during the transition period, they were prohibited from offering their services resulting significant business losses. Although SEBI proposed IAs will be obligated to only notify Investment Advisers Administration and Supervisory Body (“IAASB“) upon reaching the threshold this measure was not accepted by the Board. But the timelines to convert into non-individual IA has been extended to three months where they can add clients and receive fees apart from the specified limits.

Rationalization of Registration Requirements

Due to contemporary shift to online business models the old regime to submit valid address proof of multiple stakeholders, including the applicant, like directors/partners/principal officers/beneficial owners/individuals associated with investment advice, as part of the registration process under Form A has been streamlined. The Board has decided to get away with duplicate address proofs and rationalized all verifications through OTP based authentication of registered phone numbers and email addresses moving towards digital transformation of the industry while registering. But they will be required to disclose address and submit proof of identity.

Minimal Declarations

Previously, according to the Schedule II of the SEBI (Intermediaries) Regulations, 2008, IAs applicants are required to submit not only an Action Taken Report (ATR) but also a set of other databases, including their credit report/score from Credit Information Bureau (India) Limited (CIBIL), which is required to be checked by SEBI. However, considering various checks and the submission of a suitable declaration stating that he is a proper fit and meets all the specified criteria. Wherein, in the amended framework Board has relaxed the requirement of submitting CIBIL report, Net-worth/assessment liability statement, infrastructure details for simplifying the onboarding process.

Educational Qualification Reforms

The Board has approved proposed amendments related to educational qualifications under   Rule 7 of the IA Regulations. Previously, applications should be professionally qualified or have a postgraduate degree or diploma in fields like finance, accountancy, business management, capital markets, banking and related fields from any government-recognized institution or any foreign university or association. Additionally, Section 7 (2) of the IA Regulations mandates that the IA have certification in financial planning or any fund/asset/portfolio management or investment advisory services from NISM or any other credible organization accredited by NISM within two years from the enforcement of these regulations. The applicants are also required to obtain/maintain National Institute of Securities Market (“NISM“) certification by passing through NISM X-A and X-B examinations for investment advisory and NISM XV for research analysis. But it has been noted that any securities market or financial planning post-graduate program covers the syllabus of NISM examinations. Consequentially, to lessen the burden, Board has approved that any stream graduate with specified certifications from NISM is eligible to register as IA/RA, widening the scope of entry of various other academic backgrounds while maintaining its standards.

Post PaRRVA risks

After the operationalization of PaRRVA, though aims to efficient selection matrix for IA/RAs, but its success will depend on resolving several post-implementation risks.

Firstly, data validity remains the biggest concern where the organization’s verification depends on the data provided by the advisor. But for instance, if the data furnished is incomplete, selectively reported, not according to the accounting standards, it will result in verification distortion threating its credibility. To overcome this PaRRVA will need to specify standard input templates, audit trails and a reconciliation system with depository data.

Secondly, the regulatory coordination between SEBI, IAASB and PaRRVA is paramount to overcome abuse of verified tags provided by PaRRVA to the investor for marketing. Also, conflicting instructions between the agencies will result in delay enforcement. For which investor education, data-sharing and harmonized approvals are necessary to reduce the discrepancies and avoid abuse.

Thirdly, data privacy concerns will increase after PaRRVA’s operation, requiring it to store massive sensitive high sensitivity financial data including client portfolios, risk metrics and historical returns in regards with the new Digital Personal Data Protection Rules, 2025 which requires explicit consent, purpose limitation and data minimization.

Lastly, PaRRVA is the central repository for data and any breach of the confidential data and cybersecurity mishap will create distrust among the investors, trigger reputational shock and compromise market welfare; to mitigate these, an efficient data protection system, strict encryption standards and unbiased third-party security audits will be necessary practices.

Conclusion

The 211^th SEBI Board Meeting has provided key amendments for IA and RA Regulations by approving changes suggested by SEBI’s consultation paper. The amendments envision to transform advisory market from rigid old regime to risk-based, dynamic technology driven frameworks where transparency and accountability are essential features. For investors these changes establish a new era of informed decisions backed by verified data, reduce compliance burdens and greater advisory accountability. Additionally, the amendments are signal for a maturing securities market that promotes innovation and efficiency while anchoring investor protection. Concludingly, SEBI’s reforms showcase shared responsibility rather than a procedural burden ensuring market integrity and investor confidence.

Disclaimer

The views expressed in this article are solely those of the author(s). This article is intended for educational/information purposes only. The source of this article is publicly available information, and under no circumstances should the contents of the article be construed to be professional advice by the authors.