1.1 Scope of Research Services & Role of PARS
Key Takeaways
Regulation 2(1)(u) of the SEBI (Research Analysts) Regulations, 2014 defines a research analyst as a person who, for consideration, is engaged in the business of providing research services, including a part-time research analyst.
Regulation 2(1)(wa) lists research services: research reports and analysis, buy/sell/hold calls, price or stop-loss targets, public-offer opinions, model portfolios and trading calls.
Regulation 2(1)(ne) deems client-facing analysts, sales staff and relationship managers to be PARS, but excludes clerical staff with no research connection and no client contact.
Sales and non-core PARS certified under NISM Series XXV-A must not draft research opinions, set price targets, alter published reports or give personalised investment advice.
Unpublished research is confidential until released, so PARS must never preview drafts or upcoming rating changes to any client.
1.1 Scope of Research Services & Role of PARS
Quick Answer: The Securities and Exchange Board of India (SEBI) mandates a strict legal separation between certified Research Analysts who author models and buy/sell recommendations, and Persons Associated with Research Services (PARS) who manage sales, distribution, client onboarding, and non-core operations. Under NISM Series XXV-A, PARS may circulate unaltered, compliance-approved research reports, but they are strictly barred from rendering personal investment advice, adjusting price targets, or offering informal stock tips.
The Regulatory Foundation: SEBI (Research Analysts) Regulations, 2014
Independent and objective equity research is the foundation of transparent securities markets. In the absence of specialized regulation, equity research is vulnerable to conflicts of interest: research departments may face pressure to issue favorable ratings on companies that generate lucrative investment banking underwriting fees, or research reports may be timed to facilitate proprietary trading gains. To address these systemic vulnerabilities, the Securities and Exchange Board of India promulgated the SEBI (Research Analysts) Regulations, 2014 (hereinafter referred to as the RA Regulations).
The primary regulatory objectives of the RA Regulations include:
- Promoting Objectivity and Integrity: Ensuring that research reports reflect genuine, independent analysis based on verifiable facts rather than corporate lobbying or banking relationships.
- Mandatory Conflict Disclosures: Compelling research entities to disclose financial interests, shareholding positions (such as holding 1% or more of the subject company's equity), receipt of banking compensation, or directorships in subject companies.
- Preventing Misleading Recommendations: Shielding retail and institutional investors from ungrounded speculative hype, exaggerated target prices, and fraudulent tip-sheet operations.
- Standardizing Professional Qualifications: Requiring minimum educational qualifications and NISM certification under Regulation 7 for research analysts, principal officers, employed analysts, partners and PARS.
Statutory Definitions: Research Analyst, Research Services, Research Report & Research Entity
To master the NISM Series XXV-A curriculum, candidates must understand the core definitions in Regulation 2(1) of the RA Regulations, as amended with effect from December 16, 2024:
1. Research Analyst (Regulation 2(1)(u))
A research analyst is a person who, for consideration, is engaged in the business of providing research services, and the term includes a part-time research analyst. "Consideration" (Regulation 2(1)(fa)) means any economic benefit, including a non-cash benefit, received directly or indirectly, from the client or otherwise. SEBI's master circular clarifies that research given to clients who pay the same intermediary for another service (for example, a stockbroker's broking clients) is still provided "for consideration".
2. Research Services (Regulation 2(1)(wa))
Research services are any of the following, for securities listed or proposed to be listed on a stock exchange, whether or not the person has the job title of research analyst:
- Preparing or publishing a research report or its content;
- Providing or issuing a research report or research analysis;
- Making 'buy/sell/hold' recommendations;
- Giving a price target or stop-loss target;
- Offering an opinion concerning a public offer;
- Recommending a model portfolio;
- Providing trading calls; or
- Any other service of a similar nature or character.
The function matters, not the title. An employee called "Equity Strategist", "Sector Lead" or "Customer Support Associate" who gives buy/sell calls or price targets is providing research services.
3. Research Report (Regulation 2(1)(w))
A research report is any written or electronic communication that includes research analysis, a research recommendation or an opinion concerning securities or a public offer, providing a basis for an investment decision. The definition excludes:
- Comments on general trends in the securities market;
- Discussions on broad-based indices;
- Commentaries on economic, political or market conditions;
- Periodic reports for unit holders of mutual funds or alternative investment funds, or for clients of portfolio managers and investment advisers;
- Internal communications not given to current or prospective clients;
- Offer documents or prospectuses circulated under SEBI regulations;
- Statistical summaries of companies' financial data;
- Technical analysis of demand and supply in a sector or index; and
- Any other communication SEBI specifies.
4. Research Entity (Regulation 2(1)(v))
A research entity is a SEBI-registered intermediary that is also engaged in merchant banking, investment banking, brokerage or underwriting services and issues research reports or research analysis in its own name through individuals it employs as research analysts. The term also includes any other intermediary that issues research reports or research analysis.
Defining Persons Associated with Research Services (PARS)
While certified Research Analysts formulate the quantitative valuation models and sign off on investment theses, research firms rely on a broad group of non-core professionals to operationalize their business. These professionals are formally designated as Persons Associated with Research Services (PARS).
Regulation 2(1)(ne) defines PARS as any member, partner, officer, director, employee or other staff of a research analyst or research entity who is engaged in providing research services to clients or the public. Its explanation deems all client-facing and public-facing persons, such as analysts, sales staff, service relationship managers and client relationship managers, to be PARS, but excludes persons doing clerical or office administrative work who have no connection with research services and no client contact. SEBI's July 2025 FAQs add that staff whose activities involve no client contact, or have no connection with the research services, are not PARS and need no NISM certification.
Since SEBI's March 11, 2026 circular, PARS who perform sales and other non-core services obtain the NISM Series XXV-A certification, while other PARS continue to need NISM Series XV. The lighter module reflects that sales and non-core staff need a working knowledge of securities law, ethics and client communication rather than the full valuation syllabus of Series XV.
Typical Functional Roles Qualifying as PARS
- Client Relationship & Account Managers: Professionals who manage day-to-day interactions with institutional, corporate, and retail subscribers.
- Sales & Business Development Executives: Staff responsible for marketing research subscription packages, presenting product tiers, and expanding the firm's client base.
- Client Onboarding & Compliance Support Staff: Individuals who verify client identity documents, complete Central KYC (CKYC) and KRA validations, and manage subscription agreements.
- Secondary Data Aggregators & Research Assistants: Support personnel who collect publicly available filings (annual reports, MCA portal filings, stock exchange disclosures) and input raw financial figures into data templates under the supervision of analysts.
- Distribution & Logistics Coordinators: Operational teams responsible for formatting, dispatching, and managing distribution channels (portals, verified email broadcast systems) for published research reports.
Core Research Analysts vs. PARS: The Operational Boundary
The boundary between a certified Research Analyst and a PARS is functional, legal, and non-negotiable. The table below delineates the strict separation of responsibilities mandated by SEBI:
| Operational Dimension | Certified Research Analyst (RA) | Person Associated with Research Services (PARS) |
|---|---|---|
| Primary Certification | NISM Series XV: Research Analyst Certification | NISM Series XXV-A: Persons Associated with Research Services |
| Core Mandate | Quantitative valuation, sector modeling, authoring thesis, and signing reports | Client servicing, marketing, distribution, onboarding, and data gathering |
| Investment Ratings | Authorized to assign Buy, Sell, Hold, Accumulate, or Reduce ratings | Strictly prohibited from assigning or modifying any investment ratings |
| Target Price Formulation | Constructs DCF, P/E, or EV/EBITDA models to derive price targets | Strictly prohibited from calculating, modifying, or quoting unpublished targets |
| Client Interaction | Answers analytical inquiries, defends thesis, explains assumptions | Distributes approved reports, explains standard terminology, handles logistics |
| Personal Advice | Prohibited unless registered separately as an Investment Adviser (RIA) | Strictly prohibited from offering individual advice or assessing suitability |
| Legal Accountability | Directly liable for research integrity, factual accuracy, and conflict disclosures | Liable for marketing transparency, non-distortion of reports, and non-advisory boundary |
Note
A job title does not determine an employee's regulatory status. If an employee designated as a "Customer Support Associate" begins offering oral price targets or stock tips to clients over the telephone, that employee is providing research services without the qualification and Series XV certification that Regulation 7 requires for such work, and the firm is answerable for the breach.
Statutory Prohibitions Applicable to PARS
Because PARS serve as the direct human interface between the research entity and investors, SEBI rules establish explicit boundaries to prevent misrepresentation and market abuse:
1. Prohibition on Providing Personalized Investment Advice
Under the Indian regulatory framework, Research Services and Investment Advice represent two distinct legal activities governed by separate regulations:
- Research Services (SEBI RA Regulations, 2014): Entails preparing impersonal, standardized research reports containing facts, analysis, and recommendations distributed to a broad subscriber base or the public.
- Investment Advice (SEBI Investment Advisers Regulations, 2013): Involves assessing an individual client's personal financial position, risk capacity, asset allocation, and tailoring specific securities recommendations to meet that client's financial goals.
A PARS must never assess individual client suitability or advise a subscriber on whether to purchase a stock based on their personal financial status (e.g., retirement corpus, mortgage obligations, or tax bracket). Crossing this line exposes the firm and the individual to regulatory penalties for operating an unregistered advisory business.
2. Prohibition on Altering or Distorting Research Reports
Clients frequently ask relationship associates for "quick bullet points" or "just the bottom line." Presenting research summaries to clients is part of the PARS role, but a summary must be faithful to the published report, use firm-approved formats, and point the client to the full report. PARS must never change the report's content, rating or target. Turning a 30-page fundamental report into an informal message that highlights a ₹1,200 price target while omitting the analyst's explicit downside risks (e.g., raw material price sensitivity, foreign exchange volatility, regulatory litigation) is misleading and can be a fraudulent and unfair trade practice.
3. Absolute Prohibition on Distributing Stock Tips
PARS are legally forbidden from offering informal stock tips, "guaranteed multibagger" recommendations, or intraday momentum calls via telephone calls, WhatsApp groups, Telegram channels, SMS broadcasts, or social media handles. Circulation of unverified tips violates both the RA Regulations and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP). SEBI routinely initiates regulatory action, impounds illegal gains, and issues market debarment orders against personnel engaging in unauthorized tip dissemination.
Information Barriers, Chinese Walls & Ethical Protocols
Research entities that also engage in merchant banking, underwriting, lending, or institutional brokerage must establish robust internal physical and electronic information barriers, known as Chinese Walls. These barriers isolate research analysts who may have access to material non-public information or pre-publication draft reports from sales, trading, and distribution staff.
PARS operate firmly on the public side of the Chinese Wall. They must never seek, receive, or solicit pre-publication drafts of research reports. An analyst's upcoming upgrade or rating change is confidential until the report is made public (Code of Conduct, Third Schedule), and anyone who trades or tips ahead of it is front running the firm's own research. If a client pressures a PARS for "early insights" on what the analyst will publish next week, the PARS must firmly state that research publication schedules and draft ratings are strictly confidential, and immediately document the query according to internal compliance escalation protocols.
Warning
Leaking pre-publication research or hinting at upcoming rating revisions to favored clients breaches the Code of Conduct's confidentiality and front-running rules and Regulation 22(1) on selective distribution. It can attract SEBI action against the firm and the individual, including penalties and debarment.
A relationship associate (PARS) at a SEBI-registered research entity receives a call from an existing subscriber who asks whether they should purchase 1,000 shares of a newly covered healthcare stock to fund their child's university education next year. How must the PARS respond?
Calculate the historical dividend yield of the healthcare company to verify whether it meets the client's educational funding schedule.
Explain that PARS are legally prohibited from assessing personal suitability or providing investment advice, and provide the complete published report while referring advice questions to a registered investment adviser.
Read the target price and investment thesis over the phone and confirm that the stock represents an appropriate investment for college funding.
Prepare a customized summary highlighting only the capital appreciation potential of the healthcare company and email it to the client.
Under the definition of research services in Regulation 2(1)(wa) of the SEBI (Research Analysts) Regulations, 2014, which activity is research work that requires a research analyst (with NISM Series XV) rather than sales and non-core PARS work?
Assisting prospective subscribers with Central KYC registry verification and documentation.
Collecting publicly available financial disclosures and annual reports from stock exchange websites.
Distributing approved, finalized research publications to institutional subscribers via official email channels.
Building valuation models, determining price targets, and signing off on buy, sell, or hold recommendations.
A business development associate working for a registered research firm wants to improve marketing engagement. The associate drafts an abridged social media post featuring the analyst's target price and stating 'Guaranteed 35% return in 6 months,' while deliberately deleting the three-page risk factor section. Why is this conduct illegal under SEBI regulations?
PARS are legally prohibited from altering published research reports, omitting mandatory risk disclosures, or making deceptive claims of guaranteed returns.
Social media marketing of equity research is legal only if the post is published after market hours on a Friday.
Abridged research summaries are permitted on social media as long as the underlying company is listed in the NIFTY 50 index.
Research entities are permitted to omit risk disclosures if the post includes a direct hyperlink to the firm's payment gateway.
Sections you finish are checked off in the contents.