INTERNAL POLICY & CONTROL PROCEDURE IN TERMS OF SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
1. INTRODUCTION
SEBI vide its Notification No. LAD-NRO/GN/2014-15/07/1414 dated 1st September, 2014 has notified SEBI (Research Analysts) Regulations, 2014. The Securities & Exchange Board of India (SEBI) had formulated the SEBI (Research Analyst) Regulations, 2014 under the powers conferred on it under the SEBI Act, 1992. These regulations came into force with effect from 1st December 2014. Research analyst is required to follow the code formulated by us both in letter and spirit. These regulations have been introduced by SEBI with the objective of fostering transparency in security research and provide the investors with more reliable and useful information to make investment decisions. According to the Regulation, Chapter III of the Regulation 15 of SEBI (Research Analysts) Regulations, 2014 the entity shall have written internal policies and control procedures governing the dealing and trading by any research analyst. In compliance with the said RGX Research Private Limited, vide SEBI Research Analyst Registration No. INH000021094 (herein referred to as “The Company” or (“RGX Research Private Limited”) has formulated this policy and control procedure.
2. OBJECTIVE
- To establish proper internal control and procedures and to govern the dealing and trading by any research analyst.
- To address actual or potential conflict of interest arising from such dealings or trading of securities of Subject Company and promoting objective and reliable research that reflects the unbiased view of research analyst.
- Preventing the use of research report or research analysis to manipulate the securities market.
- To implement appropriate mechanisms to ensure independence of its research activities from its other business activities.
- To ensure compliance with SEBI rules and regulations, we being the Research Analyst registered under SEBI, is required to adopt and adhere such Research Analyst Regulation., subject to the following policies and procedures.
- It is mandatory in terms of the Regulations for every Research Analyst to formulate a Code of Conduct. In order to comply with the mandatory requirements of the Regulations, it was necessary to formulate a specific Code of Conduct. Our policy is only to publish research report which is impartial, independent, clear, fair and not misleading. Such research may be produced and published only by the analysts working with the RGX RESEARCH PRIVATE LIMITED and as per the regulations.
3. APPLICABILITY
This policy is applicable to all research analysts and associates, if any of the RGX RESEARCH PRIVATE LIMITED - research analyst i.e. a Company primarily responsible for preparation or publication of the content of the research report; or providing a research report or Making 'buy sell/hold' recommendation or giving price target or offering an opinion concerning public offer with respect to securities that are listed or to be listed in a Stock Exchange whether or not such person has the job title of 'Research Analyst'.
4. DEFINITIONS
Act means the Securities and Exchange Board of India Act, 1992 (15 of 1992)
Asset management company means a company as defined under clause(d) of Regulation 2 of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
Associate means an associate as defined in Securities and Exchange Board of India (Intermediaries) Regulations, 2008
Board means the Securities and Exchange Board of India established under section 3 of the Act
Certificate means a certificate of registration granted under these regulations
Change in control means
in case of a body corporate –
- (A) if its shares are listed on any recognised stock exchange, shall be construed with reference to the definition of control in terms of regulations framed under clause (h) of sub-section (2) of section 11 of the Act
- (B) if its shares are not listed on any recognised stock exchange, shall be construed with reference to the definition of control as provided in sub-section (27) of Section 2 of the Companies Act, 2013 (18 of 2013)
in a case other than that of a body corporate, shall be construed as any change in its legal formation or ownership or change in controlling interest.
- Explanation – For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, direct or indirect, to the extent of not less than fifty percent of voting rights or interes
Fund Manager includes fund managers of a mutual fund or alternative investment fund or venture capital fund or portfolio manager
Independent research analyst means a person whose only business activity is research analysis or preparation and/or publication of research report
Inspecting authority means any one or more persons appointed by the Board to exercise powers conferred under regulation 27
Investment adviser means any person registered under Securities and Exchange Board of India (Investment Advisers) Regulations, 2013
The Limited Liability Partnership Act, 2008(6 of 2009);
Merchant banking or Investment banking or Brokerage services” includes
- acting as an underwriter;
- participating in a selling or an offering for the issuer or otherwise acting in furtherance of a public offer of the issuer;
- acting as an adviser in a merger or acquisition;
- providing or arranging venture capital or equity or debt;
- serving as placement agent for the issuer or otherwise acting in furtherance of a private offering of the issuer;
- offering brokerage or market making services;
NBFC means a Non-Banking Financial Company registered by Reserve Bank of India
NISM means the National Institute of Securities Market established by the Board
Price target means expectations of research analyst on the future performance of specific securities
Proxy adviser means any person who provide advice, through any means, to institutional investor or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items
Public appearance means any participation in a conference call, seminar, forum (including interactive and non-interactive electronic forum), radio or television or internet or web or print media broadcast, authoring a print media article or other public speaking activity in public media in which a research analyst makes a recommendation or offers an opinion, concerning securities or public offer: Provided that it does not include a password protected webcast, conference call or such other events with the clients, if all of the event participants previously received the research report or other documentation that contains the required applicable disclosures and that the research analyst appearing at the event corrects and updates during the public appearance any disclosures in the research report that are inaccurate, misleading or no longer applicable
Public media means any media source available to the general public and includes a radio, television, internet, web or print media
Public offer includes initial public offer, further public offer, offer for sale, disinvestment, takeover, buy-back or delisting of securities
Relative means a person as defined in sub section (77) of section 2 of the Companies Act, 2013 and who is financially dependent on independent research analyst or individual research analyst employed by research entity
Research analyst means a person who is primarily responsible for,-
- preparation or publication of the content of the research report; or
- providing research report; or
- making 'buy/sell/hold' recommendation; or
- giving price target; or
- offering an opinion concerning public offer
with respect to securities that are listed or to be listed in a stock exchange, whether or not any such person has the job title of 'research analyst' and includes any other entities engaged in issuance of research report or research analysis.
Explanation. -The term also includes any associated person who reports directly or indirectly to such a research analyst in connection with activities provided above
Research entity means an intermediary registered with Board who is also engaged in merchant banking or investment banking or brokerage services or underwriting services and issue research report or research analysis in its own name through the individuals employed by it as research analyst and includes any other intermediary engaged in issuance of research report or research analysis;
Research report means any written or electronic communication that includes research analysis or research recommendation or an opinion concerning securities or public offer, providing a basis for investment decision and does not include the following communications: -
- comments on general trends in the securities market;
- discussions on the broad-based indices;
- commentaries on economic, political or market conditions;
- periodic reports or other communications prepared for unit holders of mutual fund or alternative investment fund or clients of portfolio managers and investment advisers;
- internal communications that are not given to current or prospective clients;
- communications that constitute offer documents or prospectus that are circulated as per regulations made by the Board;
- statistical summaries of financial data of the companies;
- technical analysis relating to the demand and supply in a sector or the index;
- any other communication which the Board may specify from time to time
Securities means securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956
Subject company means the company whose securities are the subject of a research report or a public appearance;
Stock exchange means a stock exchange recognised under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
Third party research report means a research report produced by a person or entity other than the research analyst or research entity
5. MANAGEMENT OF CONFLICT OF INTERESTS AND DISCLOSURE REQUIREMENTS
The Company and its Research Analysts shall maintain arms-length relationship between its research activity and other activities. To prevent the misuse of information the Company has adopted a ‘Chinese Wall’ which separates the research activities from its other business activities. The Employees working as Research Analysts shall not communicate any information to anyone in other department. The employees in Research Analysts are physically segregated from employees of other departments. Demarcations of the Research Analysts departments are implemented by the Company.
6. LIMITATIONS ON TRADING BY RESEARCH ANALYSTS
- Personal trading activities of the individuals employed as research analysts shall be monitored, recorded and wherever necessary, shall be subject to a formal approval process. ii. Research analyst shall not deal or trade any securities that the research analyst recommends or follows within 30 days before and 5 days after the publication of a research report on the subject company.
- Research analyst shall not deal or trade directly or indirectly any securities that he reviews in a manner contrary to his outstanding recommendation, etc
- Purchase or receive securities of the issuer before the issuer's initial public offering, if the issuer is principally engaged in the same types of business as companies that the research analyst follows or recommends. However, the above restrictions to trade/ deal in securities shall not be applicable in case of significant news or event concerning the subject company or based upon an unanticipated significant change in the personal financial circumstances of the research analyst, subject to prior written approval from Compliance Officer.
- Further, all the research analysts shall always adhere to the Conflict of interests Policy of the Company, developed and implemented by the Company pursuant to relevant SEBI Circulars. For the sake of brevity of this policy the same is not narrated herein, however, this policy shall be read, understood and complied by all Research Analysts in conjunction with the said Conflict of Interest Policy as may be prevalent from time to time.
7. COMPENSATION OF RESEARCH ANALYSTS
The Research Analysts in the employment of the Company shall not be entitled to any bonus, salary or other form of compensation that is based on specific brokerage services or transactions. Further, compensation of all research analysts shall be reviewed, documented and approved annually by the Designated Partners of the Company. Such Research Analysts shall perform his/her/their duties independently and shall not be under supervision /control of any employee of brokerage services division of the Company .
8. LIMITATION ON PUBLICATION OF RESEARCH REPORT, PUBLIC APPEARANCE, CONDUCT OF BUSINESS ETC
Research analyst or research entity shall not publish or distribute research report or research analysis or make public appearance regarding a subject company for which he has acted as a manager or co-manager at any time falling within a period of:
- Forty days immediately following the day on which the securities are priced if the offering is an initial public offering; or
- Ten days immediately following the day on which the securities are priced if the offering is a further public offering:
A research entity who has agreed to participate or is participating as an underwriter of an issuer's initial public offering shall not publish or distribute a research report or make public appearance regarding that issuer before expiry of twenty five days from the date of the offering.
Research analyst or research entity who has acted as a manager or co-manager of public offering of securities of a company shall not publish or distribute a research report or make a public appearance concerning that company within fifteen days prior to date of entering into and fifteen days after the expiration/waiver/termination of a lock-up agreement or any other agreement that the research analyst or research entity has entered into with a subject company that restricts or prohibits the sale of securities held by the subject company after the completion of public offering of securities:
Research analyst or individuals employed as research analyst by research entity shall not participate in business activities designed to solicit investment banking or merchant banking or brokerage services business, such as sales pitches and deal road shows.
Research analyst or individuals employed as research analyst by research entity shall not engage in any communication with a current or prospective client in the presence of personnel from investment banking or merchant banking or brokerage services divisions or company management about an investment banking services transaction.
Investment banking or merchant banking or brokerage services division’s personnel of research entity shall not direct the individuals employed as research analyst to engage in sales or marketing related to an investment banking or merchant banking or brokerage services and shall not direct the research analyst to engage in any communication with a current or prospective client about such division’s transaction:
Research analyst or research entity shall have adequate documentary basis, supported by research, for preparing a research report.
Research analyst or research entity shall not provide any promise or assurance of favourable review in its research report to a company or industry or sector or group of companies or business group as consideration to commence or influence a business relationship or for the receipt of compensation or other benefits.
Research analyst or research entity shall not issue a research report that is not consistent with the views of the individuals employed as research analyst regarding a subject company. (10) Research entity shall ensure that the individuals employed as research analyst are separate from other employees who are performing sales trading, dealing, corporate finance advisory or any other activity that may affect the independence of its research report:
Provided that research analyst or research entity may publish or distribute research report or research analysis or make public appearance within such forty day and ten day periods, subject to prior written approval of legal or compliance personnel as specified in the internal policies and procedures.
Explanation - For the purposes of sub-regulations (1) and (2), the date of the offering refers to the first date on which the security was offered to the public.
Provided that research analyst or research entity may publish or distribute research report or research analysis or make public appearance regarding that company within such fifteen days subject to prior written approval of legal or compliance personnel as specified in the internal policies and procedures.
Provided that sub-regulations (4) to (6) shall not prohibit research analyst or research entity from engaging in investor education activities including publication of pre-deal research and briefing the views of the research analyst on the transaction to the sales or marketing personnel.
Provided that the individual employed as research analyst by research entity can receive feedback from sales or trading personnel of brokerage division to ascertain the impact of research report.
9. DISCLOSURES IN RESEARCH REPORTS
A research analyst or research entity shall disclose all material information about itself including its business activity, disciplinary history, the terms and conditions on which it offers research report, details of associates and such other information as is necessary to take an investment decision, including the following:
Research analyst or research entity shall disclose the following in research report and in public appearance with regard to ownership and material conflicts of interest:
- whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company and the nature of such financial interest;
- whether the research analyst or research entity or its associates or relatives, have actual/beneficial ownership of one per cent. or more securities of the subject company, at the end of the month immediately preceding the date of publication of the research report or date of the public appearance;
- whether the research analyst or research entity or his associate or his relative, has any other material conflict of interest at the time of publication of the research report or at the time of public appearance
Research analyst or research entity shall disclose the following in research report with regard to receipt of compensation:
- whether it or its associates have received any compensation from the subject company in the past twelve months;
- whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months;
- whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
- whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months;
- whether it or its associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
Research analyst or research entity shall disclose the following in public appearance with regard to receipt of compensation:
- whether it or its associates have received any compensation from the subject company in the past twelve months;
- whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided: Provided that research analyst or research entity shall not be required to make a disclosure as per sub-clauses (c), (d) and (e) of clause (ii) or sub-clauses (a) and (b) of clause (iii) to the extent such disclosure would reveal material nonpublic information regarding specific potential future investment banking or merchant banking or brokerage services transactions of the subject company.
whether the research analyst has served as an officer, director or employee of the subject company
whether the research analyst or research entity has been engaged in market making activity for the subject company;
Research analyst or research entity shall provide all other disclosures in research report and public appearance as specified by the Board under any other regulations.
10. CONTENTS OF RESEARCH REPORT
- Research analyst or research entity shall take steps to ensure that facts in its research reports are based on reliable information and shall define the terms used in making recommendations, and these terms shall be consistently used.
- Research analyst or research entity that employs a rating system must clearly define the meaning of each such rating including the time horizon and benchmarks on which a rating is based.
- If a research report contains either a rating or price target for subject company’s securities and the research analyst or research entity has assigned a rating or price target to the securities for at least one year, such research report shall also provide the graph of daily closing price of such securities for the period assigned or for a three-year period, whichever is shorter.
11. RECOMMENDATIONS IN PUBLIC MEDIA
Research analyst or research entity including its Partner or employee shall disclose the registration status and details of financial interest in the subject company, if he makes public appearance.
If any person including a Partner or employee of an investment adviser or credit rating agency or asset management company or fund manager, makes public appearance or makes a recommendation or offers an opinion concerning securities or public offers through public media, all the provisions of regulations 16 and 17 shall apply mutatis mutandis to him and he shall disclose his name, registration status and details of financial interest in the subject company at the time of,-
- making such recommendation or offering such opinion in personal capacity;
- responding to queries from audiences or journalists in personal capacity;
- communicating the research report or substance of the research report through the public media
12. DISTRIBUTION OF RESEARCH REPORTS
- A research report shall not be made available selectively to internal trading personnel or a particular client or class of clients in advance of other clients who are entitled to receive the research report.
- Research analyst or research entity who distributes any third party research report shall review the third party research report for any untrue statement of material fact or any false or misleading information.
13. MAINTENANCE OF RECORDS
Research analyst or research entity shall maintain the following records:
- research report duly signed and dated;
- research recommendation provided;
- rationale for arriving at research recommendation;
- record of public appearance.
All records shall be maintained either in physical or electronic form and preserved for a minimum period of five years: Provided that where records are required to be duly signed and are maintained in electronic form, such records shall be digitally signed.
14. AUDIT
Research analyst or research entity shall conduct annual audit in respect of compliance with these regulations from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India.
15. APPOINTMENT OF COMPLIANCE OFFICER
- Research analyst or research entity which is a limited liability partnership firm shall appoint a compliance officer who shall be responsible for monitoring the compliance of the provisions of the Act, these regulations and circulars issued by the Board.
- The Compliance Officer shall maintain a record for the purpose of adherence to the Code of Conduct. The Compliance Officer shall assist all the analysts and its associates, if any in addressing any clarifications regarding the Regulations and the Company’s Code of Conduct.
- In order to discharge his functions effectively, the Compliance Officer shall be adequately empowered and provided with adequate infrastructure to effectively discharge his function. In the performance of his duties, the Compliance Officer shall have access to all information and documents relating to the Securities of the Companies under research. The Compliance Officer shall act as the focal point for dealings with SEBI in connection with all matters relating to the compliance and effective implementation of the Regulations and this Policy.
16. REDRESSAL OF INVESTOR GRIEVANCES
The Research Analyst shall redress investor grievances promptly but not later than twenty-one calendar days from the date of receipt of the grievance and in such manner as may be specified by the Board.
17. GENERAL RESPONSIBILITY
- Research analyst or research entity shall maintain an arms-length relationship between its research activity and other activities
- Research analyst or research entity shall abide by Code of Conduct as specified in Third Schedule.
- In case of change in control of the research analyst or research entity, prior approval from the Board shall be taken. Research analyst or research entity shall furnish to the Board information and reports as may be specified by the Board from time to time.
- It shall be the responsibility of the research analyst or research entity to ensure that its employees or partners, as may be applicable, comply with the certification and qualification requirements under regulation 7 at all times.
18. OBLIGATIONS FOR ANALYSTS IN GLANCE
- Research Analysts are required to observe high standards of integrity and ethical behaviour.
- All research reports must be based on strict standards of truthfulness and fair dealing, and must be presented in a manner such that they are fair, clear and not misleading.
- Analysts are required to ensure that they have a reasonable basis for their analysis and recommendations.
- Analysts who are working on a research project of any listed company, shall disclose their shareholding/interest to the Compliance Officer before commencing the research and submit a statement regarding his/her holding(s) in securities (including holdings of his/her dependents) in such a listed company and also an undertaking that he or his dependents shall not deal in the securities of the said listed company for a period of 30 days prior and/or 5 days after publication of research report or recommendation.
- Analysts shall not deal or trade directly or indirectly in securities that he reviews in a manner contrary to his given recommendation.
- Analysts shall not purchase or receive securities of the issuer before the issuer’s initial public offering, if the issuer is principally engaged in the same types of business as companies that the research analyst follows or recommends.
- Analysts shall have adequate documentary basis supported by Research for preparing the research report and the same is required to be maintained
- Analysts are required to obtain NISM certification and keep relevant NISM active all the times.
19. RESEARCH ANALYST OR RESEARCH ENTITY SHALL ABIDE BY CODE OF CONDUCT
Code of conduct for research analyst
- Honesty and Good Faith-Research analyst or research entity shall act honestly and in good faith.
- Diligence- Research analyst or research entity shall act with due skill, care and diligence and shall ensure that the research report is prepared after thorough analysis.
- Conflict of Interest-Research analyst or research entity shall effectively address conflict of interest which may affect the impartiality of its research analysis and research report and shall make appropriate disclosures to address the same.
- Insider Trading or front running-Research analyst or research entity or its employees shall not engage in insider trading or front running or front running of its own research report
- Confidentiality-Research analyst or research entity or its employees shall maintain confidentiality of report till the report is made public.
- Professional Standard-Research analyst or research entity or its employees engaged in research analysis shall observe high professional standard while preparing research report.
- Compliance-Research analyst or research entity shall comply with all regulatory requirements applicable to the conduct of its business activities.
- Responsibility of senior management-The senior management of research analyst or research entity shall bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures.
The senior management of research analyst shall bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures. In case of change in control of the Company, prior approval from the SEBI shall be taken. The Company shall furnish to the Board information and reports as may be specified by the SEBI from time to time.
20. INAPPROPRIATE INFLUENCES
- Analysts are not permitted to accept any remuneration or other benefit from the issuer or any other party in respect of the publication of research.
- Analysts are not permitted to offer or accept any inducement for the production of favourable research, including selective disclosure by an issuer of material information not generally available;
- Analysts are not permitted to directly or indirectly offer favourable research, specific ratings or specific price targets as consideration or inducement for the receipt of business or compensation;
- Analysts are not permitted to directly or indirectly offer or threaten to change research, a rating or price target as consideration or inducement for the receipt of business or compensation;
- The above policy is adopted for Research analyst services to
- Address actual or potential conflict of interest arising from such dealings or trading of securities of subject company
- Promote objective and reliable research that reflects the unbiased view of research analyst
- Prevent the use of research report or research analysis to manipulate the securities market
- Ensure independence of its research activities from its other business activities
- This policy has been considered, implemented and circulated by RGX Research Private Limited.