The Securities and Exchange Board of India (Sebi) has proposed exempting research analysts from maintaining call recordings of interactions with institutional investors while retaining existing norms for retail clients. According to reports from CNBC TV18, ETLegalWorld, The Economic Times, and The Hindu BusinessLine, this proposal was announced on Monday as part of efforts to ease compliance requirements for research analysts and improve ease of doing business. The regulator suggested that research analysts and research entities should no longer be required to maintain call recordings for communications with institutional investors, though they should still need to preserve other records of interactions, such as emails, SMS messages and any other legally verifiable documents.
Under existing rules, research analysts are required to preserve records of all communications with clients — including call recordings, emails, SMSes, and other verifiable documents — for a period of five years. As reported by CNBC TV18, ETLegalWorld, The Economic Times, and The Hindu BusinessLine, this comprehensive record-keeping requirement applies to all client interactions regardless of investor type. The proposal specifically exempts call recordings while maintaining requirements for other forms of communication documentation, with the relaxation applying only to institutional investors while retail client requirements remain unchanged. These records must be maintained for five years and retained longer if disputes arise or if directed by the regulator.
The proposal follows representations from market participants who argued that institutional investors are sophisticated entities with the expertise and resources to independently assess research inputs, evaluate investment opportunities, and undertake due diligence before acting on research reports. According to The Economic Times and The Hindu BusinessLine, the Industry Standard Forum for Research Analysts has represented that institutional investors, in general, are sophisticated entities, possessing specialised knowledge and substantial resources required to independently evaluate complex research inputs and investment opportunities. Sebi noted that such investors have adequate knowledge to evaluate investment opportunities vis-a-vis risks involved in the same and to undertake due diligence before making investment decisions based on research reports. The regulator emphasized that unlike retail investors, institutional clients are generally well aware of their legal rights and the regulatory mechanisms available to protect them.
Separately, Sebi has widened the permitted use of fresh borrowings by Infrastructure Investment Trusts (InvITs) whose net debt exceeds 49% of the value of their assets. According to Upstox News Desk, these changes, which have come into force with immediate effect, are aimed at providing greater flexibility to InvITs in managing funding requirements. The regulator has permitted InvITs to use such borrowings for capital expenditure to enhance asset performance or for capacity augmentation, and also allowed these funds to be used for major maintenance expenses related to road projects. Sebi clarified that major maintenance refers to non-routine expenditure incurred in line with obligations under concession agreements. The regulator has also permitted refinancing of debt by the InvIT, its special purpose vehicle (SPV), or holding company (Holdco), subject to certain conditions, with only the principal amount eligible for refinancing.
To implement the proposal, Sebi has suggested amendments to the Sebi (Research Analysts) Regulations, 2014. The regulator has also proposed adopting the definition of "institutional investor" from the Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2018. As reported by CNBC TV18, ETLegalWorld, The Economic Times, and The Hindu BusinessLine, the proposal follows representations from the Industry Standards Forum for Research Analysts and aims to reduce compliance burden while maintaining investor protection standards. The requirement of recording for client interactions is primarily intended to protect investor interests by facilitating supervisory oversight, but Sebi aims to simplify these rules while protecting investor interests. Separately, Sebi has clarified that an SPV holding an infrastructure project will continue to be treated as an SPV even after the concession agreement ends, with the investment manager required to exit the investment within one year or acquire a new infrastructure project.
