Research Analyst
Under the SEBI (Research Analysts) Regulations, 2014, a person who, for consideration, is engaged in the business of providing research services — including a part-time research analyst.
In plain language
In everyday talk, a research analyst is anyone who studies companies and says what to buy. The legal meaning is narrower, and it has real consequences.
In law, a research analyst is a person who, for consideration, is engaged in the business of providing research services. "For consideration" simply means for a fee or other payment. A part-time research analyst is included too.
Anyone who fits this definition must be registered with SEBI first. They cannot act as a research analyst before that. They cannot even present themselves as one.
Registration comes with duties. The analyst must meet qualification rules and place a deposit. They must keep records and get an annual audit. They must follow a code of conduct. They must also settle complaints within a set time.
How it works
The workbook's Chapter 14 walks through the regulations:
| Regulation | What it requires |
|---|---|
| 3 | No person shall act as a research analyst without a SEBI certificate. Investment advisers, credit rating agencies, AMCs and fund managers issuing research to the public are exempt, subject to Chapter III |
| 7 | A graduate degree (or CFA charter) plus relevant NISM certification, or NISM's Post Graduate Program in the Securities Market (Research Analysis). Fresh NISM certification before the existing one expires, or within three years of registration, as the case may be |
| 8 | A deposit, marked as lien in favour of the recognised supervisory body (RAASB); it may be held as liquid or overnight mutual fund units or a scheduled bank deposit |
| 10 | The certificate is valid until suspended or cancelled |
| 25 | Records (signed reports, rationale, KYC, client register, communications) kept for at least five years; an annual audit by a CA, CS or cost accountant |
| 26B | Grievances redressed within 21 calendar days |
| 26C | An individual research analyst shall not provide distribution services; a non-individual keeps research and distribution clients segregated at group level |
The code of conduct in the Third Schedule covers honesty and good faith, diligence, conflict of interest, no insider trading or front running, confidentiality, professional standards, compliance and senior management responsibility.
A worked example
Illustrative. Meera, a commerce graduate in Pune who holds the NISM Series XV certificate, registers as an individual research analyst and charges subscribers Rs 12,000 a year.
- A subscriber complains on 5 September. She must resolve it by 26 September — 21 calendar days, weekends included.
- A client asks her to also sell him mutual fund units so he earns nothing on commission. She cannot: an individual research analyst shall not provide distribution services, and her family may not distribute to a client she serves.
- Her 2025 research reports, the rationale behind each call and her client register must be kept until at least 2030.
- Her registration does not lapse on a fixed date. It runs until SEBI suspends or cancels it — but her certification must be renewed on the regulation 7 timetable, or she falls out of compliance.
Why NISM asks about it
The definition appears on the very first page of Chapter 1, and Chapter 14 (Legal and Regulatory Environment) covers regulations 3 to 26C, the code of conduct and the investor charter. Questions test the qualification route, the registration exemptions, the 21-day grievance period, the five-year record rule and the ban on individual analysts distributing products.
Common exam traps
- "For consideration" is part of the definition. The regulations are aimed at research as a business.
- Registration is not time-bound. It is valid until suspended or cancelled; it is the NISM certification that has to be refreshed.
- Not everyone who publishes research registers under regulation 3. Investment advisers, credit rating agencies, AMCs and fund managers are exempt from registration but still bound by Chapter III.
- 21 calendar days, not working days, for grievance redressal.
- Individual analysts cannot distribute at all; non-individuals may, but not to the same client within the group.
- A person outside India issuing research on Indian listed securities must tie up with a registered research analyst or research entity (regulation 4).
Check yourself
1.Under the SEBI Research Analysts Regulations, 2014, a Research Analyst means a person who:
- a)Trades in securities on his own account only
- b)For consideration, is engaged in the business of providing research services, including a part-time research analyst
- c)Advises only institutional clients, on a full-time basis
- d)Manages a portfolio of securities on behalf of clients
Show the answer
Answer: (b) For consideration, is engaged in the business of providing research services, including a part-time research analyst
As per SEBI Research Analysts Regulations, 2014, a Research Analyst means a person who, for consideration, is engaged in the business of providing research services and includes a part-time research analyst.
Two elements of the definition are worth noticing.
"For consideration" — the activity must be carried on as a business for reward.
"Includes a part-time research analyst" — the express inclusion closes off the argument that occasional or part-time research falls outside the regulations.
Option D describes a portfolio manager, a different intermediary altogether.
What the role actually involves: there is Research — collection of information from various sources — and then Analysis — processing of data to take decisions. And in summary, the role of a research analyst is that of a selector — to do a comprehensive study of companies, evaluate their past performance, analyse how a company is expected to perform in the future and make recommendations based on this analysis.
2.Which is listed among the desired qualities of a good research analyst?
- a)A licence to trade on the exchange floor
- b)Ability to read and comprehend financial statements and reports
- c)A minimum of ten years in fund management
- d)Membership of a stock exchange
Show the answer
Answer: (b) Ability to read and comprehend financial statements and reports
The workbook's list of desired qualities: good with numbers · good Excel (spread sheet) and other data analytical tools · clarity in financial concepts · ability to read and comprehend financial statements and reports · ability to ask pertinent questions · attention to details · communication skills — written and verbal.
None of the other options appears; they describe brokers or fund managers rather than analysts.
The broader description of what the job demands: the job of research analysts requires quantitative and qualitative skills. An analyst needs to have a high degree of comfort in dealing with numbers to be able to analyse various financial factors, identify trends and see the inter-relationship between different factors. At the same time, he needs to be methodical, have an enquiring mind and be discerning to know where to find relevant information.
And one more capability is singled out: ability to understand business models and competitive dynamics in a business is another important quality an analyst must possess.
Notice that communication skills sit alongside the numerical ones — the analysis is worthless if the client cannot follow it, which is why the client guidelines require reports to be simple, clear and concise.
3.An analyst who works for a boutique firm and sells sector reports by subscription to institutions and stock exchanges is:
- a)A sell-side analyst
- b)A buy-side analyst
- c)An independent research analyst
- d)A portfolio manager
Show the answer
Answer: (c) An independent research analyst
Independent Research Analysts work for research originators or boutique firms separate from full-service investment firms and sell their research to others on a subscription basis. Their clients could be investors, institutions, investment bankers, regulators, stock exchanges, fund managers etc.
Note the breadth of that client list — regulators and stock exchanges appear on it, which is distinctive to the independent category.
They also do commissioned work: they also provide customized research reports on the businesses or industries or sectors on specific requests. The purpose of these reports could vary from investment activity to understanding competition landscape to mergers and acquisition etc.
The defining contrast with the sell-side is the employer: independent analysts are at firms separate from full-service investment firms, whereas sell-side analysts work for firms that provide investment banking, broking, advisory services for clients.
And with the buy-side: buy-side analysts work for asset managers... that purchase and sell securities for their own investment accounts or on behalf of their investors/clients, and their reports are not available in public domain.
Where this is taught
Free preparation for NISM Series III-ARelated terms
- Buy-side analystAn analyst employed by an asset manager — a mutual fund, pension fund, hedge fund, AIF, FPI or portfolio manager — whose recommendations are written for the employer's own fund managers, not the public.
- Chinese WallAn enforced separation inside a firm between departments holding confidential price-sensitive information and those dealing with clients, sales or public research.
- Conflict of interestAny interest of the analyst's own — a shareholding, a fee, a relationship — that could bias the research, and which the regulations require to be disclosed rather than merely avoided.
- Research reportA document presenting an investment idea — analysis plus a recommendation. SEBI excludes market commentary, index discussion, internal notes and statistical summaries from the definition.
- Sell-side analystAn analyst at a firm offering investment banking, broking or advisory services who publishes research in the public domain with a buy, hold or sell call and a price target.
- Research Objectivity StandardsThe CFA Institute's specific, measurable norms for managing and disclosing the conflicts of interest that can stop a research analyst producing independent research and objective recommendations.
- Additional Surveillance MeasuresAn exchange surveillance framework that shortlists securities on unusual price and volume behaviour and client concentration, then raises margins and can narrow price bands.
- Trading callsIntraday, ultra-short and non-personalised buy/sell recommendations — defined so precisely that SEBI's rules say they do not count as investment advice at all.
- Primary researchFirst-hand information an analyst gathers directly — plant visits, and conversations with customers, suppliers or employees — rather than sourced from published reports.
- Independent research analystThe third of the workbook's analyst categories: one who works for a research originator or boutique firm separate from full-service investment firms, and sells research on subscription.
- Proxy adviserA person who advises institutional investors or shareholders on exercising their rights in a company, including voting recommendations on agenda items and recommendations on public offers.
- Black box algoAn algorithmic trading strategy whose logic is not disclosed to, or replicable by, the user. Under SEBI's retail algo framework its provider must register as a Research Analyst.