A key concern is a SEBI restriction that bars research analysts and investment advisors from publishing the accuracy of their trading calls or past performance of model portfolios on websites or social media.
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HEMANSHI KAMANI
Despite a recent relaxation by the Securities and Exchange Board of India (SEBI) on advance fee collection, research analysts remain hesitant to restart operations, citing a still-onerous compliance burden and issues making business unviable.
In January, a number of well-known research outfits, including Neeraj Marathe’s Sentinel Research, Jiten Parmar and Niteen Dharmawat’s Aurum Capital, Stalwart Advisors’ Treasure Trove, and Mystic Wealth, voluntarily paused operations. This was due to a SEBI circular restricting research analysts (RAs) from collecting advance fees beyond one quarter—a decision that many said crippled their cash flows and made the business unsustainable.
Following weeks of industry pushback, SEBI rolled back the decision last month, allowing analysts to collect advance fees for up to one year. But most players are still on the sidelines as they await more relief from the regulator.
Unfair Playing Field
Last month, groups of RAs as well as the Association of Registered Research Analysts of India (ARRAI) met the new SEBI chairperson Tuhin Kanta Pandey and other top SEBI policymakers regarding the persisting concerns.
A key concern is a SEBI restriction that bars research analysts and investment advisors from publishing the accuracy of their trading calls or past performance of model portfolios on websites or social media—a privilege that other intermediaries and unregulated financial influencers or ‘finfluencers’ enjoy.
“It’s unfair. Finfluencers can openly market performance—real or exaggerated—while regulated analysts can’t even mention theirs in any shape or form,” said a research analyst, not wishing to be named. As a result, client acquisition has become more expensive. “Without the ability to advertise performance, our marketing costs have more than doubled. It’s hard to break even,” the RA said.
To address this, SEBI is expected to fast-track the setup of a performance validation agency, which will independently verify and monitor analysts’ returns. According to a source close to the discussions, SEBI may even outsource this task to speed up the process, with a solution expected within 3–6 months.
Compliance Fatigue
Analysts said that they are also burdened by other regulations, including rigid Know Your Customer (KYC) norms, mandatory disclaimers, and restrictions on trading in stocks they recommend.
“Lowering entry barriers may increase registrations, but it is still very difficult to remain compliant and run a viable business,” said another analyst. “Last few years, compliance has been a moving goal post which has exhausted a significant chunk of our resources and energy.”
The rise of unregulated entities and finfluencers has further complicated matters. While SEBI has been taking down their posts and has penalised several for misleading claims, analysts say many simply return under new aliases or platforms. The increased competition from the unregulated space has made it even more difficult to sustain in the business.
Published on April 6, 2025
