Sebi's New Guidelines Force Research Firms to Close Down

Sebi's new guidelines for research analysts have led to increased compliance costs, prompting several firms to cease operations. While the rules make it easier for newcomers, established firms find them burdensome. Experts argue these regulations could degrade market research quality, citing operational and compliance challenges.

The Securities and Exchange Board of India's (Sebi) recent guidelines have triggered a wave of closures among equity research firms, as the new rules impose substantial compliance and operational burdens. The guidelines, aimed at curbing illegal practices and fraudulent stock recommendations, have prompted firms like Sentinel Research, Stalwart Advisors, and Mystic Wealth to announce their shutdown plans.

Experts argue that while the new regulations simplify entry for new analysts by lowering registration thresholds, they simultaneously place significant constraints on existing players, leading to increased operational costs. Sandeep Parekh, founder of Finsec Law Advisors, criticized the rules on social media, warning that they might drive competent analysts out of the market.

Neeraj Marathe from Sentinel Research and others in the sector echo these concerns, emphasizing the challenge of navigating the stricter guidelines. Stalwart Advisors highlighted the requirement to limit subscription fees to a quarterly payment model as a major obstacle, indicating potential unintended consequences for long-term investment strategies.

(With inputs from agencies.)