5.6 Code of Conduct, Terms and Conditions & MITC
Key Takeaways
The Code of Conduct in the Third Schedule of the SEBI (Research Analysts) Regulations, 2014 has eight items, from Honesty and Good Faith to Responsibility of Senior Management.
The Code requires research reports to be prepared after thorough analysis, conflicts of interest to be addressed and disclosed, and reports to be kept confidential until made public.
Item 4 of the Code bars research analysts and their employees from insider trading and front running, including front running of their own research reports.
The standardised MITC tells clients that an RA cannot trade for them, that individual fees are capped at ₹1,51,000 per family a year, and that returns are never guaranteed.
No research service may be rendered or fee charged before the client consents to the terms; signed consent is optional only for institutional investors and qualified institutional buyers.
5.6 Code of Conduct, Terms and Conditions & MITC
Quick Answer: Regulation 24(2) of the SEBI (Research Analysts) Regulations, 2014 requires every research analyst and research entity to follow the Code of Conduct in the Third Schedule, which has eight items: Honesty and Good Faith; Diligence; Conflict of Interest; Insider Trading or Front Running; Confidentiality; Professional Standard; Compliance; and Responsibility of Senior Management. Regulation 24(6) requires the RA to disclose its terms and conditions, including the standardised Most Important Terms and Conditions (MITC), and to take the client's consent before rendering any service or charging any fee.
The Code of Conduct in the Third Schedule
The Code of Conduct is not an aspirational statement: Regulation 24(2) makes it a legal obligation of the research analyst or research entity. Because PARS act on the firm's behalf, and Regulation 24(5) makes the firm responsible for its staff's qualification and certification, firms build the Code into every PARS role. Breaches can lead to action under Chapter V of the RA Regulations, including suspension or cancellation of registration.
CODE OF CONDUCT FOR RESEARCH ANALYSTS (THIRD SCHEDULE)
1. Honesty and Good Faith 5. Confidentiality
2. Diligence 6. Professional Standard
3. Conflict of Interest 7. Compliance
4. Insider Trading or Front 8. Responsibility of Senior
Running Management
1. Honesty and Good Faith
The research analyst or research entity shall act honestly and in good faith. For PARS this means truthful onboarding, marketing and research relay: no invented track records, no exaggerated claims and no hidden charges.
2. Diligence
The RA shall act with due skill, care and diligence and ensure that the research report is prepared after thorough analysis. PARS show diligence by relaying research completely and accurately, without distorting, exaggerating or selectively quoting the analyst's conclusions.
3. Conflict of Interest
The RA shall effectively address conflicts of interest that may affect the impartiality of its research and shall make appropriate disclosures. In practice this means information barriers between research and banking or sales, the Regulation 16 trading restrictions, and the Regulation 19 disclosures (financial interest, 1% holding, compensation in the past 12 months).
4. Insider Trading or Front Running
The RA and its employees shall not engage in insider trading, front running, or front running of its own research report. A PARS who tips a client about an upcoming downgrade, or trades ahead of it, breaches this item.
5. Confidentiality
The RA and its employees shall maintain the confidentiality of a report until it is made public. Drafts, publication schedules and upcoming rating changes must not be previewed to anyone.
6. Professional Standard
The RA and its employees engaged in research analysis shall observe high professional standards while preparing research reports. At firm level this includes qualified and certified staff: Series XV for analysts and Series XXV-A for sales and non-core PARS.
7. Compliance
The RA shall comply with all regulatory requirements applicable to its business, including the SEBI Act, the RA Regulations, the PIT and PFUTP Regulations, KYC and PMLA obligations, and SEBI circulars.
8. Responsibility of Senior Management
The senior management of the RA or research entity bears primary responsibility for maintaining appropriate standards of conduct and adherence to proper procedures, including the supervision of frontline PARS.
Terms and Conditions and the Standardised MITC
Regulation 24(6) requires a research analyst to disclose the terms and conditions of its research services and take the client's consent in the manner SEBI specifies. SEBI's Master Circular for Research Analysts (February 6, 2026) sets out the minimum terms and the Most Important Terms and Conditions (MITC), which the Industry Standards Forum standardised in consultation with SEBI and the RAASB (SEBI circular of February 17, 2025).
Minimum Terms and Conditions
The terms disclosed to clients must at least cover:
| Clause | What It Says |
|---|---|
| Availing research services | The client subscribes at their sole discretion; the RA renders services under the RA Regulations |
| Obligations | Both the RA and the client are bound by the SEBI Act and applicable SEBI regulations |
| Client information and KYC | The client furnishes required details; the RA collects, stores, uploads and checks KYC records with a KYC Registration Agency |
| Standard terms of service | The client's acknowledgement that investments carry market risk, that recommendations give no assurance of returns and that there is no recourse for losses; the RA's declarations, including registration details and the maximum fee of ₹1.51 lakh per annum per family |
| Consideration and payment | Agreed fees plus statutory charges, paid through the specified modes |
| Risk factors and conflict of interest | A statement of standard investment risks and the mandatory conflict disclosures |
| Termination and refund | If SEBI suspends the RA's registration for more than 60 days or cancels it, fees are refunded pro rata for the rest of the subscription period |
| Grievance redressal | Service-delivery grievances (non-receipt of a report, missing pages, download failure) go to a named person and are resolved within 7 business working days or the timeline SEBI specifies; disputes go to arbitration or another SEBI-specified mechanism |
| Additional clauses | Voluntary clauses must not contravene SEBI rules, and changes require 15 days' notice |
| Mandatory notice | Clients are asked to read SEBI's Do's and Don'ts for dealing with research analysts |
| Optional CeFCoM | Guidance on the optional Centralised Fee Collection Mechanism for IAs and RAs |
The Twelve MITC Points
The MITC must be disclosed to every client:
- The terms and consent are for research services only; the RA cannot execute or carry out any trade for the client, so clients should not let the RA trade on their behalf.
- Fees for individual and HUF clients are capped at the amount SEBI or the RAASB prescribes: currently ₹1,51,000 per annum per family for all research services of the RA, excluding statutory charges and not applicable to non-individual clients or accredited investors.
- Fees may be charged in advance if the client agrees, within the period SEBI allows (the master circular now permits up to one year, although the standard MITC text still says one quarter), and on premature termination the client may seek a refund of proportionate fees for the unexpired period.
- Fees may be paid by cheque, online bank transfer, UPI or similar modes; cash payment is not allowed; payment through the Centralised Fee Collection Mechanism (CeFCoM) run by BSE is optional.
- The RA follows SEBI and RAASB rules on disclosing and mitigating conflicts of interest and will try to inform the client promptly of any conflict.
- Assured, guaranteed or fixed-return schemes are prohibited by law and will not be offered.
- The RA cannot guarantee returns, profits, accuracy or risk-free investments; opinions and projections rest on assumptions as of the report date.
- Investments based on recommendations are subject to market risk; there is no recourse to claim losses, and reliance on a report is at the client's own judgement.
- SEBI registration, enlistment with the RAASB and NISM certification do not guarantee the RA's performance or assure any returns.
- Grievances: first contact the RA; if unsatisfied, lodge a complaint on SEBI's SCORES platform (scores.sebi.gov.in); the client may also use online dispute resolution on the SMART ODR portal (smartodr.in).
- Clients must keep their email ID and mobile numbers updated with the RA at all times.
- The RA will never ask for the client's login credentials or OTPs for trading, demat or bank accounts, and clients should never share them with anyone, including the RA.
Note
The fee and refund rules in points 2 to 4 apply to individual and HUF clients who are not accredited investors. Non-individual clients, accredited investors, and institutional investors seeking proxy-adviser recommendations negotiate fee terms bilaterally.
Taking Client Consent Before Onboarding
1. Consent Before Any Service or Fee
SEBI's master circular states that neither any research service shall be rendered nor any fee charged until the client has consented to the terms and conditions. Consent may be signed in person or given through any other legally acceptable mode, including DigiLocker-enabled Aadhaar-based e-signature. Existing clients had to give consent by their next renewal or fee due date, whichever came first.
2. Institutional Investors and QIBs
SEBI's July 2025 FAQ circular relaxed one point: for institutional investors and qualified institutional buyers, signed consent on the terms and MITC is not mandatory, but the RA must still disclose the terms and MITC to them.
3. Records and Audit
The terms disclosed and the client's consent are records under Regulation 25(1)(viii) and must be kept for at least five years under Regulation 25(2). The annual compliance audit by a member of ICAI, ICSI or ICMAI checks these files.
| Code of Conduct Item | Core Requirement | Frontline PARS Application |
|---|---|---|
| 1. Honesty and Good Faith | Act honestly and in good faith | Accurate representations; no false promises |
| 2. Diligence | Due skill, care and diligence; reports prepared after thorough analysis | Relay the complete analyst rationale; no cherry-picking or distortion |
| 3. Conflict of Interest | Address conflicts and make appropriate disclosures | Respect information barriers; follow trading approvals; keep Regulation 19 disclosures intact |
| 4. Insider Trading or Front Running | No insider trading or front running, including of own reports | Never trade or tip ahead of a report or rating change |
| 5. Confidentiality | Keep a report confidential until it is made public | Never preview drafts or publication schedules |
| 6. Professional Standard | High professional standards in preparing reports | Hold a valid NISM Series XXV-A certificate; use approved materials |
| 7. Compliance | Comply with all applicable regulatory requirements | Follow KYC, record-keeping, advertisement and grievance rules |
| 8. Responsibility of Senior Management | Senior management bears primary responsibility for conduct standards | Escalate issues; follow supervisory controls |
Under item 3 of the Code of Conduct (Conflict of Interest) and Regulation 19 of the SEBI RA Regulations, what is required when a research firm publishes an initiating coverage report on a company for which it managed a public offering in the preceding 12 months?
The firm must conceal the merchant banking relationship to avoid creating bias in subscribers' minds.
The firm is permanently prohibited from publishing research on any company that used its investment banking division.
The firm must disclose in the research report that it or its associates managed or co-managed a public offering for the subject company in the past 12 months, along with any compensation received.
The firm can publish the report without disclosures if the analyst signs an affidavit that they never spoke to the merchant banking team.
Which statement correctly describes SEBI's requirements for the terms and conditions, including the MITC, when a research analyst onboards clients?
The MITC is an optional marketing guideline that can be summarised over a phone call without any record.
The MITC applies only to institutional subscribers paying more than ₹50 lakh a year and not to retail subscribers.
The client may sign the MITC up to 180 days after research reports have started being delivered.
The terms and MITC must be disclosed and the client's consent obtained before any service is rendered or fee charged (consent is optional only for institutional investors and QIBs), and the consent record kept for at least five years.
Under item 8 of the Code of Conduct in the Third Schedule of the SEBI (Research Analysts) Regulations, 2014 (Responsibility of Senior Management), who bears primary responsibility for maintaining appropriate standards of conduct and adherence to proper procedures, including supervising frontline PARS?
The senior management of the research analyst or research entity.
The junior sales associate who handles day-to-day client onboarding calls.
The stock exchange official who oversees trading terminals.
The third-party vendor that supplies the firm's CRM software.
Sections you finish are checked off in the contents.