Can a SEBI research analyst trade in the stocks they recommend?

Regulation 16 of the SEBI (Research Analysts) Regulations, 2014 sets three limits on independent research analysts, part-time research analysts and individuals employed as research analysts by a research entity. Each limit binds their associates as well.

• No dealing in a security you recommend or follow within 30 days before and 5 days after you publish a research report (regulation 16(2)).
• No dealing, directly or indirectly, in a security you review in a way that runs against your own recommendation (regulation 16(3)).
• No buying or receiving shares of a company before its IPO if it is mainly in the same type of business as the companies you follow or recommend (regulation 16(4)).

Your family is caught too

"Associate" comes from the SEBI (Intermediaries) Regulations, 2008. Where the analyst is an individual it includes any relative. Your spouse's demat account sits inside the same windows as yours.

The two exceptions

Regulation 16(6) lets you deal inside a window when there is significant news or an event about the company, or an unanticipated significant change in your own finances. Either way you need prior written approval under your own approved internal policy. A one-person practice therefore still needs a written trading policy, which regulation 15 asks for in any case.

What you disclose when you do hold

Regulation 19 asks each research report and public appearance to say whether you, your associates or relatives have a financial interest in the company, whether you, your associates or relatives own 1% or more of its securities at the end of the previous month, and any other material conflict of interest.

Inside a research entity

Employed analysts' personal trades are monitored, recorded and, where needed, approved (regulation 16(1)). The three limits apply to the entity itself unless it has separated research from its other activities at arm's length (regulation 16(5)).

We draft the trading policy and a register that logs each report against its 30-day and 5-day windows, as part of the ₹24,999 Adviser Documentation Pack. The full list of what a registered analyst runs each year is in how to become a SEBI registered research analyst.