MASTER CIRCULAR
SEBI/HO/MIRSD-PoD-2/P/CIR/2023/90 June 15, 2023 To, All Research Analysts registered with Securities and Exchange Board of India Dear Madam / Sir, Subject: Master Circular for Research Analysts

1. Securities and Exchange Board of India (SEBI), from time to time, has been
   issuing various circulars/directions to Research Analysts (RAs). In order to enable users to have access to the applicable circulars at one place, this Master Circular in respect of RAs is being issued.
2. The Master Circular is a compilation of all the existing/ applicable circulars issued
   by SEBI pertaining to Research Analysts.
3. The list of SEBI circulars compiled in this Master Circular is given in Appendix at
   the end of this Master Circular. From the date of issuance of this Master Circular, the circulars mentioned in Appendix stand rescinded, to the extent applicable to Research Analysts.
4. Notwithstanding such rescission,
   a) Anything done or any action taken or purported to have been done or taken under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular;

b) Any application made to the Board under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular; c) The previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the rescinded circulars, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the rescinded circulars have never been rescinded.
5. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
6. This circular is available on SEBI website at www.sebi.gov.in .
Yours faithfully
Srishti Ambokar
Deputy General Manager
Tel. No. 022-26449354 srishtijc@sebi.gov.in

TABLE OF CONTENTS
Sr.
No.
Subject Page
No.
I. GUIDELINES FOR RESEARCH ANALYSTS

1. Procedural Guidelines for Proxy Advisors 5
   II. INVESTOR COMPLAINTS
2. Grievance Resolution between listed entities and proxy advisers 7
3. Redressal of investor grievances through SEBI Complaints Redress
   system (SCORES) Platform
   8
4. Publishing of Investor Charter and disclosure of Investor Complaints
   by Research Analysts on their websites/ mobile applications 9
   III. TECHNOLOGY RELATED
5. Advisory for Financial Sector Organizations regarding Software as a
   Service (SaaS) based solutions
   10
   IV. MISCELLANEOUS
6. Procedure for seeking prior approval for change in control 11
7. Advertisement code and usage of brand name/trade name 14
8. Unauthenticated news circulated by SEBI Registered Market
   Intermediaries through various modes of communication 20
9. Guidelines on outsourcing of activities by Intermediaries 21
10. Framework for Regulatory Sandbox 23
11. General Guidelines for dealing with Conflicts of Interest of
    Intermediaries and their Associated Persons in Securities Market 23
12. Approach to securities market data access and terms of usage of data
    provided by data sources in Indian securities market 26
13. Reporting Requirements under Foreign Account Tax Compliance Act
    (FATCA)
    26
14. Guidelines on Anti-Money Laundering (AML) Standards and
    Combating the Financing of Terrorism (CFT) /Obligations of Securities 27

Sr.
No.
Subject Page
No.
Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under
V. REPORTING REQUIREMENTS 28
VI. ANNEXURES 30
15. ANNEXURE A - Investor Charter In respect of RAs 30
16. ANNEXURE B - Complaint Data to be displayed by RAs 33
17. ANNEXURE C - Advisory for Financial Sector Organizations Software
as a Service (SaaS) based solution
35
18. ANNEXURE D - Declaration cum undertaking for seeking prior
approval for change in control
37
19. ANNEXURE E - Principles for outsourcing for intermediaries 39
VII. APPENDIX : List of Circulars/ Notifications/Communications 46

I. GUIDELINES FOR RESEARCH ANALYSTS

1. Procedural Guidelines for Proxy Advisors1
   1.1 Regulation 24(2) read with regulation 23(1) of the Securities and Exchange
   Board of India (Research Analyst) Regulations, 2014 (‘the Regulations’) mandates proxy advisors to abide by Code of Conduct specified therein. It is decided that proxy advisors shall also comply with the following procedural guidelines:
   a) Proxy Advisors shall formulate the voting recommendation policies and disclose the updated voting recommendation policies to its clients. Proxy Advisors shall ensure that the policies should be reviewed at least once annually. The voting recommendation policies shall also disclose the circumstances when not to provide a voting recommendation. b) Proxy Advisors shall disclose the methodologies and processes followed in the development of their research and corresponding recommendations to its clients. c) Proxy Advisors shall alert clients, within 24 hours of receipt of information, about any factual errors and any impending material revisions to their reports. Further, any such material revisions to their reports shall be communicated to the clients within 72 hours of receipt of the information, while ensuring that adequate time is available for clients to make an informed decision.2 d) Proxy Advisors shall have a stated process to communicate with its clients and the company. 1 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/147 dated August 03, 2020 2 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/256 dated December 31, 2020.

e) Proxy Advisors shall share their report with its clients and the company at the same time. This sharing policy should be disclosed by proxy advisors on their website. Timeline to receive comments from company may be defined by proxy advisors and all comments/clarifications received from the company, within timeline, shall be included as an addendum to the report. If the company has a different viewpoint on the recommendations stated in the report of the proxy advisors, then proxy advisors, after taking into account the said viewpoint, may either revise the recommendation in the addendum report or issue an addendum to the report with its remarks, as considered appropriate. f) Proxy Advisors shall clearly disclose in their recommendations the legal requirement vis-a-vis higher standard they are suggesting if any, and the rationale behind the recommendation of higher standards. g) Proxy Advisors shall disclose conflict of interest on every specific document where they are giving their advice. Further, the disclosures should especially address possible areas of potential conflict and the safeguards that have been put in place to mitigate possible conflicts of interest. h) Proxy Advisors shall establish clear procedures to disclose, manage and/or mitigate any potential conflicts of interest resulting from other business activities including consulting services, if any, undertaken by them and disclose the same to clients.
1.2 The provisions of Clause 1.1(c) and 1.1(e) became applicable with effect
from February 01, 2021.3 All other provisions of clause 1.1 became applicable with effect from January 01, 2021.4 3 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/157 dated August 27, 2020 and Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/256 dated December 31, 2020 4 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/157 dated August 27, 2020.

II. INVESTOR COMPLAINTS
2. Grievance Resolution between listed entities and proxy advisers5
2.1 Regulation 4(2)(a) of the Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’) casts certain obligations on listed entities to protect and facilitate the exercise of the rights of shareholders, including:
a) right to participate in, and to be sufficiently informed of, decisions concerning fundamental corporate changes, b) opportunity to participate effectively and vote in general shareholder meetings, c) effective shareholder participation in key corporate governance decisions, such as the nomination and election of members of board of directors and d) exercise of ownership rights by all shareholders, including institutional investors.
2.2 Proxy advisors, over the past few years, have played a key role in enabling
shareholders to effectively participate in corporate governance decisions and thus, furthering the achievement of the above objectives. Proxy advisors provide advice to institutional investors / shareholders of a listed entity, in relation to exercise of their rights in the company including voting recommendation on agenda items. However, due to the inherent nature of the work, it is probable that proxy advisors and listed entities may have different views on any agenda item of the listed entity leading to grievances.
2.3 In order to facilitate resolution of such grievances of listed entities against
SEBI registered proxy advisors, the listed entities may approach SEBI. SEBI will examine the matter for non-compliance by proxy advisors with the 5 Reference: Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/119 dated August 04, 2020

provisions of the Code of Conduct under regulation 24(2) read with regulation 23(1) of the Regulations and the procedural guidelines for proxy advisors as mentioned at clause 1.1.
2.4 The provisions under this clause became applicable with effect from January
01, 2021.
6
3. Redressal of investor grievances through SEBI Complaints Redress system
(SCORES) Platform7
3.1. SEBI has been taking various measures to create awareness among
investors about grievance mechanisms available to them through workshops as well as through print and electronic media.
3.2. As an additional measure and for information of all investors who deal/
invest/ transact in the market, the research analysts shall prominently display in their offices the following information about the grievance redressal mechanism available to investors. Dear Investor, In case of any grievance / complaint against the research analyst:

• Please contact Compliance Officer of the research analyst (Name and
  Address) / email-id (xxx.@email.com) and Phone No. - 91- XXXXXXXXXX.

• You may also approach CEO / Partner / Proprietor (Name) / email- id
  (xxx.@email.com) and Phone No. - 91-XXXXXXXXXX.
  6 Reference: Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/159 dated August 27, 2020. 7 Reference: Circular No. CIR/MIRSD/3/2014 dated August 28, 2014 and SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 07, 2022

• If not satisfied with the response of the research analyst you can lodge your
  grievances with SEBI at http://scores.gov.in or you may also write to any of the offices of SEBI. For any queries, feedback or assistance, please contact SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575.
  3.3. Research analysts are also advised to refer to Master Circular reference no.
  SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 07, 2022 issued by SEBI on the redressal of investor grievances through the SEBI Complaints Redress System (SCORES) platform at the following link:
  https://www.sebi.gov.in/legal/master-circulars/nov-2022/master-circular-on￾the-redressal-of-investor-grievances-through-the-sebi-complaints-redress￾system-scores-platform_64742.html

4. Publishing of Investor Charter and disclosure of Investor Complaints by
   Research Analysts on their websites/mobile applications8
   4.1. In order to facilitate investor awareness about various activities which an
   investor deals with while availing the services provided by research analysts, SEBI has developed an Investor Charter for Research Analysts. This Charter is a brief document containing details of services provided to investors, their rights, dos and don’ts, responsibilities, investor grievance handling mechanism and estimated timelines thereof etc., at one single place, in a lucid language, for ease of reference.
   4.2. All registered Research Analysts are advised to bring to the notice of their
   clients the Investor Charter as provided at Annexure A by prominently displaying on their websites and mobile applications. Research Analysts not having websites/mobile applications shall, as a one-time measure, send Investor Charter to the investors on their registered e-mail address. 8 Reference: Circular No. SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0685 dated December 13, 2021

4.3. Additionally, in order to enhance transparency in grievance redressal,
Research Analyst (RA) shall disclose on their websites/mobile applications, all complaints including SCORES complaints received by them in the format mentioned in Annexure B on a monthly basis. The information shall be made available by 07th of the succeeding month. Research Analysts not having websites/mobile applications shall send status of Investor Complaints to the investors on their registered email on a monthly basis.
4.4. Further, Research Analysts are advised to display link/option to lodge
complaint with them directly on their websites and mobile apps. Additionally, link to SCORES website/ link to download mobile app (SEBI SCORES) may also be provided.
4.5. The disclosure requirements under this clause came into effect from January
01, 2022.
III. TECHNOLOGY RELATED
5. Advisory for Financial Sector Organizations regarding Software as a Service
(SaaS) based solutions9
5.1 Ministry of Electronics & Information Technology, Govt. of India (‘MEITy’),
has informed SEBI that the financial sector institutions are availing or thinking of availing Software as a Service (SaaS) based solution for managing their Governance, Risk & Compliance (GRC) functions so as to improve their cyber Security Posture. As observed by MEITy, though SaaS may provide ease of doing business and quick turnaround, but it may bring significant risk to health of financial sector as many a time risk and 9 Reference: Circular No. SEBI/HO/MIRSD2/DOR/CIR/P/2020/221 dated November 03, 2020

compliance data of the institution moves beyond the legal and jurisdictional boundary of India due to nature of shared cloud SaaS, thereby posing risk to the data safety and security.
5.2 In this regard, Indian Computer Emergency Response Team (CERT-in) has
issued an advisory for Financial Sector organizations. The advisory has been forwarded to SEBI for bringing the same to the notice of financial sector organization. The advisory can be viewed at Annexure C.
5.3 It is advised to ensure complete protection and seamless control over the
critical systems at your organizations by continuous monitoring through direct control and supervision protocol mechanisms while keeping the critical data within the legal boundary of India.
5.4 The compliance of the advisory shall be reported half yearly by research
analysts to SEBI with an undertaking, “Compliance of the SEBI circular for Advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions has been made.”
IV. MISCELLANEOUS
6. Procedure for seeking prior approval for change in control10
6.1 Regulation 24(3) of the Regulations provide that research analyst or
research entity shall obtain prior approval of SEBI in case of change in control.
6.2 To streamline the process of providing approval to the proposed change in
10 Reference: Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2022/163 dated November 28, 2022

control of research analyst or research entity (hereinafter referred as intermediary or applicant), it has been decided as under:
i) The Intermediary shall make an online application to SEBI for prior approval through the SEBI Intermediary Portal (‘SI Portal’) (https://siportal.sebi.gov.in). ii) The online application in SI portal shall be accompanied by the following information/declaration/undertaking about itself, the acquirer(s)/the person(s) who shall have the control and the directors/partners of the acquirer(s)/ the person(s) who shall have the control:
a. Current and proposed shareholding pattern of the applicant. b. Whether any application was made in the past to SEBI seeking registration in any capacity but was not granted? If yes, details thereof.
c. Whether any action has been initiated / taken under Securities
Contracts (Regulation) Act, 1956 (SCRA)/Securities and Exchange Board of India Act, 1992 (SEBI Act) or rules and regulations made thereunder? If yes, the status thereof along with the corrective action taken to avoid such violations in the future. The acquirer/ the person who shall have the control shall also confirm that it shall honour all past liabilities / obligations of the applicant, if any. d. Whether any investor complaint is pending? If yes, steps taken and confirmation that the acquirer/ the person who shall have the control shall resolve the same. e. Details of litigation(s), if any.

f. Confirmation that all the fees due to SEBI have been paid. g. Declaration cum undertaking of the applicant and the acquirer/ the person who shall have the control (in a format enclosed at Annexure D), duly stamped and signed by their authorized signatories that:
(i) there will not be any change in the Board of Directors of incumbent, till the time prior approval is granted; (ii) pursuant to grant of prior approval by SEBI, the incumbent shall inform all the existing investors/ clients about the proposed change prior to effecting the same, in order to enable them to take informed decision regarding their continuance or otherwise with the new management; and (iii) the ‘fit and proper person’ criteria as specified in Schedule II of SEBI (Intermediaries) Regulations, 2008 are complied with. h. In case the incumbent is a registered stock broker, clearing member, depository participant, in addition to the above, it shall obtain approval/NOC from all the stock exchanges/clearing corporations/ depositories, where the incumbent is a member/depository participant and submit self-attested copy of the same to SEBI. iii) The prior approval granted by SEBI shall be valid for a period of six months from the date of such approval within which the applicant shall file application for fresh registration pursuant to change in control.
6.3 To streamline the process of providing approval to the proposed change in
control of an intermediary in matters which involve scheme(s) of arrangement which needs sanction of the National Company Law Tribunal (NCLT) in terms of the provisions of the Companies Act, 2013, the following

has been decided:
i) The application seeking approval for the proposed change in control of the intermediary shall be filed with SEBI prior to filing the application with NCLT. ii) Upon being satisfied with compliance of the applicable regulatory requirements, an in-principle approval will be granted by SEBI; iii) The validity of such in-principle approval shall be three months from the date issuance, within which the relevant application shall be made to NCLT. iv) Within 15 days from the date of order of NCLT, the intermediary shall submit an online application in terms of clause 5.2 along with the following documents to SEBI for final approval:
a. Copy of the NCLT Order approving the scheme; b. Copy of the approved scheme;
c. Statement explaining modifications, if any, in the approved scheme
vis-à-vis the draft scheme and the reasons for the same; and d. Details of compliance with the conditions/ observations, if any, mentioned in the in-principle approval provided by SEBI.
7. Advertisement code and usage of brand name/trade name 11
7.1. Research Analysts shall ensure compliance with the advertisement code as
11 Reference: Circular Nos. SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/51 dated April 05, 2023 and SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/52 dated April 06, 2023

prescribed below:
a. Forms of communication:
i. Advertisement shall include all forms of communications, issued by
or on behalf of RA, that may influence investment decisions of any investor or prospective investor.
ii. The forms of communications, to which the advertisement code shall
be applicable, shall include pamphlets, circulars, brochures, notices, research reports or any other literature, document, information or material published, or designed for use in any publication or displays (such as newspaper, magazine, sign boards/hoardings at any location), in any electronic, wired or wireless communication (such as electronic mail, text messaging, messaging platforms, social media platforms, radio, telephone, or in any other form over the internet) or over any other audio-visual form of communication (such as television, tape recording, video tape recordings, motion pictures) or in any other manner whatsoever. b. Information/disclosures in the advertisement:
The information/disclosures that the advertisement shall contain, include the following￾i. Name of the RA as registered with SEBI, registered office address, SEBI Registration No., logo/brand name/trade name of RA, and CIN of the RA, if applicable.
ii. Information which is accurate, true and complete in unambiguous
and concise language.

iii. Standard warning in legible fonts (minimum 10 font size) which
states “Investment in securities market are subject to market risks. Read all the related documents carefully before investing.”. No addition or deletion of words shall be made to/from the standard warning.
iv. In audio-visual media based advertisements, the standard warning
in visual media based advertisement and accompanying voice over reiteration shall be audible in a clear and understandable manner. For example, in standard warning both the visual and the voice over reiteration containing 20 words running for at least 10 seconds may be considered as clear and understandable.
v. Whenever the advertisement is being issued in a language other
than English, it will be ensured that the standard warning is accurately translated in the language of the advertisement.
vi. In case the mode of advertisement is SMS/Message/Pop-up, social
media etc. and the details such as full name, logo/brand name, full registered office address, SEBI registration number, membership number of a SEBI recognized supervisory body, if any and standard disclaimer are not mentioned, then official website hyperlink should be provided in such SMS/Message/Pop-up, etc. and the website must contain all such details.
vii. In case any specific security/securities are displayed in the
advertisement as examples, disclaimer that "The securities quoted are for illustration only and are not recommendatory" should be mentioned.
viii. Advertisements and communications/correspondences with clients
shall include the disclaimer that “Registration granted by SEBI,

membership of a SEBI recognized supervisory body (if any) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.”
c. Prohibitions in the advertisement:
The advertisement shall not contain:
i. Anything which is prohibited for publication under the law.
ii. Statements which are false, misleading, biased or deceptive, based
on assumptions or projections.
iii. Any misleading or deceptive testimonials.
iv. Statements which, directly or by implication or by omission, may
mislead the investor.
v. Any statement likely to be misunderstood or likely to disguise the
significance of the same or any other statement contained in the advertisement.
vi. Any statement designed to exploit the lack of experience or
knowledge of the investors.
vii. Any statement that is exaggerated or is inconsistent with or
unrelated to the nature and risk and return profile of the product.
viii. Extensive use of technical or legal terminology or complex language
and the inclusion of excessive details which may distract the investors.

ix. Reference to any report, analysis, or service as free, unless it
actually is free and without condition or obligation.
x. Any promise or guarantee of assured or risk free return to the
investors.
The advertisement shall not imply any assured returns or minimum returns or target return or percentage accuracy or service provision till achievement of target returns or any other nomenclature that gives the impression to the client that the recommendation of research report is risk-free and/or not susceptible to market risks and/or that it can generate returns with any level of assurance.
xi. Any statement which directly or indirectly discredits other
advertisements or intermediaries or makes unfair comparisons or ascribes any qualitative advantage over other intermediaries directly or indirectly.
xii. Reference to past performance of the RA.
xiii. Superlative terms such as “Best”, “No. 1”, Top Research Analyst,
“Leading”, “One of the best amongst market leaders”, etc. so as to provide any endorsement of quality or standing of the RA. However, factual details of awards received by the RA from independent organizations may be included.
xiv. Advertisements shall not include SEBI Logo.
d. Other compliances/requirements:
i. Prior approval for the advertisement/material shall be obtained from
SEBI recognized supervisory body, if any, before issue.

ii. In the event of suspension of any RA by SEBI, the RA so suspended
shall not issue any advertisement either singly or jointly with any other RA, during the period of suspension.
iii. The RA shall not engage in games, leagues, schemes, competitions
etc. which may involve distribution of prize monies, medals, gifts, etc.
iv. These norms shall be applicable to any other investment/ research/
consultancy agency associated with the RA concerned and issuing advertisement wherein the RA has been named in the advertisement.
v. Copy of the advertisement shall be retained by RA for a period of
five years in terms of Regulation 25 (2) of SEBI (Research Analysts) Regulations, 2014.
vi. Any additional guidelines as may be specified by SEBI or SEBI
recognized supervisory body, if any, from time to time.
7.2. In order to ensure the transparency in usage of brand name/trade name/logo,
RA shall ensure that:
i. The information such as name of the RA as registered with SEBI, its
logo, its registration number and its complete address with telephone numbers shall be prominently displayed on portal/web site, if any, notice board, display boards, advertisements, publications, know your client forms and client agreements, if any.
ii. The information such as name of the RA as registered with SEBI, its
logo, its registration number, its complete address with telephone numbers, the name of the compliance officer, his telephone number

and e-mail address, the name, telephone number and e-mail address of the grievance officer or the grievance redressal cell shall be displayed prominently in statements or reports or any other form of correspondence with the client.
iii. Disclaimer that “Registration granted by SEBI and certification from
NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors” shall be mentioned on portal/web site, if any, notice board, display boards, advertisements, publications, know your client forms, client agreements, if any, statements or reports or any other form of correspondence with the client.
iv. SEBI logo shall not be used by RA.
7.3. The aforesaid provisions on advertisement code and usage of brand name/
trade name became applicable with effect from May 01, 2023.
8. Unauthenticated news circulated by SEBI Registered Market Intermediaries
through various modes of communication12
8.1. Due to lack of proper internal controls and poor training, employees of
intermediaries are sometimes not aware of the damage which can be caused by circulation of unauthenticated news or rumours. It is a well established fact that market rumours can do considerable damage to the normal functioning and behaviour of the market and distort the price discovery mechanisms.
8.2. In view of the above facts, SEBI Registered Market Intermediaries are
directed that:
12 Reference: Circular No. CIR/ISD/1/2011 dated March 23, 2011

a. Proper internal code of conduct and controls should be put in place. b. Employees/temporary staff/voluntary workers etc. employed/working in the Offices of market intermediaries do not encourage or circulate rumours or unverified information obtained from client, industry, any trade or any other sources without verification.
c. Access to Blogs/Chat forums/Messenger sites etc. should either be
restricted under supervision or access should not be allowed. d. Logs for any usage of such Blogs/Chat forums/Messenger sites (called by any nomenclature) shall be treated as records and the same should be maintained as specified by the respective Regulations which govern the concerned intermediary. e. Employees should be directed that any market related news received by them either in their official mail/personal mail/blog or in any other manner, should be forwarded only after the same has been seen and approved by the concerned Intermediary’s Compliance Officer. If an employee fails to do so, he/she shall be deemed to have violated the various provisions contained in SEBI Act/Rules/Regulations etc. and shall be liable for action. The Compliance Officer shall also be held liable for breach of duty in this regard13.
9. Guidelines on Outsourcing of Activities by Intermediaries14
9.1. SEBI Regulations for various intermediaries require that they shall render at
all times high standards of service and exercise due diligence and ensure proper care in their operations. 13 Circular No. CIR/ISD/2/2011 dated March 24, 2011. 14 Circular No. CIR/MIRSD/24/2011 dated December 15, 2011.

9.2. It has been observed that often the intermediaries resort to outsourcing with
a view to reduce costs, and at times, for strategic reasons.
9.3. Outsourcing may be defined as the use of one or more than one third party
– either within or outside the group - by a registered intermediary to perform the activities associated with services which the intermediary offers.
9.4. Principles for Outsourcing
a. The risks associated with outsourcing may be operational risk, reputational risk, legal risk, country risk, strategic risk, exit-strategy risk, counter party risk, concentration and systemic risk. The principles for outsourcing are given below in Annexure E.
9.5. Activities that shall not be Outsourced:
a. The intermediaries desirous of outsourcing their activities shall not, however, outsource their core business activities and compliance functions. An example of core business activity may be – execution of orders and monitoring of trading activities of clients in case of stock brokers. Regarding Know Your Client (KYC) requirements, the intermediaries shall comply with the provisions of SEBI {KYC (Know Your Client) Registration Agency} Regulations, 2011 and Guidelines issued thereunder from time to time.
9.6. Other Obligations:
Reporting to Financial Intelligence Unit (FIU) - The intermediaries shall be responsible for reporting of any suspicious transactions / reports to FIU or any other competent authority in respect of activities carried out by the third parties.

10. Framework for Regulatory Sandbox15
    10.1. The Objective of Regulatory Sandbox is to grant certain facilities and
    flexibilities to the entities regulated by SEBI so that they can experiment with FinTech solutions in a live environment and on limited set of real users for a limited time frame.
    10.2. The guidelines pertaining to the functioning of the Regulatory Sandbox are
    provided vide SEBI Circular No. SEBI/HO/ITD/ITD/CIR/P/2021/575 dated June 14, 2021 and SEBI/HO/MIRSD/MIRSD_IT/P/CIR/2021/0000000658 dated November 16, 2021 which are available at the link below:
    https://www.sebi.gov.in/legal/circulars/jun-2021/revised-framework-for￾regulatory-sandbox_50521.html and https://www.sebi.gov.in/legal/circulars/nov-2021/framework-for-regulatory￾sandbox_53982.html
11. General Guidelines for dealing with Conflicts of Interest of intermediaries
    and their Associated Persons in Securities Market.16
    11.1. All intermediaries are presently governed by the provisions for avoidance of
    conflict of interest as mandated in the regulations read with relevant circulars issued from time to time by SEBI. On the lines of Principle 8 of the International Organisation of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulations, it has been decided to put in place comprehensive guidelines to collectively cover such intermediaries, for elimination of their conflict of interest, as detailed hereunder.
    11.2. Intermediaries shall adhere to these guidelines for avoiding or dealing with
    or managing conflict of interest. They shall be responsible for educating their 15 Reference: Circular No. SEBI/HO/ITD/ITD/CIR/P/2021/575 dated June 14, 2021 and SEBI/HO/MIRSD/MIRSD_IT/P/CIR/2021/0000000658 dated November 16, 2021 16 Reference: Circular CIR/MIRSD/5/2013 dated August 27, 2013.

associated persons for compliance of these guidelines.
11.3. For the purpose of these guidelines "associated persons" shall have the
same meaning as defined in Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007.
11.4. Intermediaries and their associated persons shall,
a. lay down, with active involvement of senior management, policies and internal procedures to identify and avoid or to deal or manage actual or potential conflict of interest, develop an internal code of conduct governing operations and formulate standards of appropriate conduct in the performance of their activities, and ensure to communicate such policies, procedures and code to all concerned; b. at all times maintain high standards of integrity in the conduct of their business;
c. ensure fair treatment of their clients and not discriminate amongst them;
d. ensure that their personal interest does not, at any time conflict with their duty to their clients and client’s interest always takes primacy in their advice, investment decisions and transactions; e. make appropriate disclosure to the clients of possible source or potential areas of conflict of interest which would impair their ability to render fair, objective and unbiased services; f. endeavor to reduce opportunities for conflict through prescriptive measures such as through information barriers to block or hinder the flow of information from one department/ unit to another, etc.;

g. place appropriate restrictions on transactions in securities while handling a mandate of issuer or client in respect of such security so as to avoid any conflict; h. not deal in securities while in possession of material non published information;
i. not to communicate the material non published information while dealing
in securities on behalf of others; j. not in any way contribute to manipulate the demand for or supply of securities in the market or to influence prices of securities; k. not have an incentive structure that encourages sale of products not suiting the risk profile of their clients;
l. not share information received from clients or pertaining to them,
obtained as a result of their dealings, for their personal interest;
11.5. The Boards of intermediaries shall put in place systems for implementation
of the aforementioned guidelines and provide necessary guidance enabling identification, elimination or management of conflict of interest situations. The Boards shall review the compliance of the above guidelines periodically.
11.6. The said guidelines shall be in addition to the provisions, if any, contained in
respective regulations/ circulars issued by the Board from time to time regarding dealing with conflict of interest, in respect of intermediaries.

12. Approach to securities market data access and terms of usage of data
    provided by data sources in Indian securities market17
    12.1. Research Analysts are advised to make note of the following:
    “As far as the data provided by various data sources in Indian securities markets pursuant to regulatory mandates for reporting and disclosure in public domain are concerned, such data should be made available to users, ‘free of charge’ both for ‘viewing’ the data as also for download in the format as specified by regulatory mandate for reporting, as well as their usage for the value addition purposes.”
    12.2. Further, apart from the data made available free of cost, data which is
    chargeable should be appropriately identified as such in public domain.
13. Reporting Requirements under Foreign Account Tax Compliance Act18
    13.1. India joined the Multilateral Competent Authority Agreement (MCAA) on
    Automatic Exchange of Financial Account Information on June 03, 2015. In terms of the MCAA, all countries which are signatory to MCAA, are obliged to exchange a wide range of financial information after collecting the same from financial institutions in their country / jurisdiction.
    13.2. On July 09, 2015, the Governments of India and United States of America
    (USA) signed an agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (FATCA) in India. The USA enacted FATCA in 2010 to obtain information on accounts held by US taxpayers in other countries. As per the aforesaid agreement, foreign financial institutions (FFIs) in India will be required to report tax information 17 Reference: Circular SEBI/HO/DEPA-III/DEPA-III_SSU/P/CIR/2022/25 dated Feb 25,2022 18 Reference: Circular CIR/MIRSD/2/2015 dated August 26, 2015 and Circular CIR/MIRSD/3/2015 dated September 10, 2015.

about US account holders / taxpayers directly to the Indian Government which will, in turn, relay that information to the U.S. Internal Revenue Service (IRS).
13.3. For implementation of the MCAA and agreement with USA, the Government
of India has made necessary legislative changes to Section 285BA of the Income Tax Act, 1961. Further, the Government of India has notified Rules 114F to 114H (herein after referred to as “the Rules”) under the Income Tax Rules, 1962 and form No. 61B for furnishing of statement of reportable account specified in the Rules. The Rule is presently available at the following link:
http://www.incometaxindia.gov.in/communications/notification/notification% 20no.%2062%20dated%2007-08-2015.pdf
13.4. A “Guidance Note on implementation of Reporting Requirements under
Rules 114F to 114H of the Income Tax Rules” as issued by the Department of Revenue, Ministry of Finance vide F.No.500/137/2011-FTTR-III dated August 31, 2015 is available at http://www.incometaxindia.gov.in/communications/notification/guidance_not es_on_im plementation_31_08_2015.pdf, for information and necessary action.
13.5. Research Analysts shall take necessary steps to ensure compliance with the
requirements specified in the aforesaid Rules after carrying out necessary due diligence.
14. Guidelines on Anti-Money Laundering (AML) Standards and Combating the
Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under

Research Analysts are advised to refer to SEBI’s Master Circular bearing reference no. SEBI/HO/MIRSD/MIRSD-SEC-5/P/CIR/2023/022 issued on February 03, 2023 with respect to ‘Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under’ available at the following link:
https://www.sebi.gov.in/legal/master-circulars/feb-2023/guidelines-on-anti￾money-laundering-aml-standards-and-combating-the-financing-of-terrorism-cft￾obligations-of-securities-market-intermediaries-under-the-prevention-of-money￾laundering-act-2002-a-_67833.html
V. REPORTING REQUIREMENTS

1. Complaint Data to be displayed by RAs on their website/ mobile application
   by 07th of the succeeding month:
   Formats for investors complaints data to be disclosed monthly by RAs on their website/mobile application:
   Data for the month ending -_____________
   Sr.
   No.
   Received from
   Pending at the end of last month
   Recei ved
   Resolv ed *
   Total
   Pending

Pending complaints

3months
Average
Resolution time^ (in days)
1 Directly from
Investors
2 SEBI
(SCORES)

3 Other
Sources (if any)
Grand
Total
Inclusive of complaints of previous months resolved in the current month. #Inclusive of complaints pending as on the last day of the month. ^ Average Resolution time is the sum total of time taken to resolve each complaint in days, in the current month divided by total number of complaints resolved in the current month. Trend of monthly disposal of complaints Sr. No. Month Carried forward from previous month Received Resolved Pending# 1 April, YYYY 2 May, YYYY 3 June, YYYY 4 …………….. 5 March, YYYY Grand Total Inclusive of complaints of previous months resolved in the current month. #Inclusive of complaints pending as on the last day of the month. Trend of annual disposal of complaints Sr. No. Year Carried forward from previous year Received Resolved Pending# 1 2018-19 2 2019-20 3 2020-21 4 20XX-XX Grand Total *Inclusive of complaints of previous years resolved in the current year. #Inclusive of complaints pending as on the last day of the year.

2. Undertaking on compliance of the advisory for Financial Sector
   Organizations regarding Software as a Service (SaaS) based solutions to be submitted half yearly:
   The compliance of the advisory shall be reported by research analysts to SEBI with an undertaking, “Compliance of the SEBI circular for Advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions has been made.”
3. To conduct annual audit:
   In terms of regulation 25(3) of RA Regulations, research analyst or research entity shall conduct annual audit in respect of compliance with RA regulations and circulars issued thereunder from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India.
   VI. ANNEXURES
   ANNEXURE A
   INVESTOR CHARTER IN RESPECT OF RAs
   A. Vision and Mission Statements for investors

• Vision:
  Invest with knowledge & safety.
• Mission:
  Every investor should be able to invest in right investment products based on their needs, manage and monitor them to meet their goals, access reports and enjoy financial wellness.

B. Details of business transacted by the Research Analyst with respect to the investors

• To publish research report based on the research activities of the RA.
• To provide an independent unbiased view on securities.
• To offer unbiased recommendation, disclosing the financial interests in
  recommended securities.
• To provide research recommendation, based on analysis of publicly available
  information and known observations.
• To conduct audit annually
  C. Details of services provided to investors (No Indicative Timelines)
• Onboarding of Clients
• Disclosure to Clients:
  To distribute research reports and recommendations to the clients without discrimination.
• To maintain confidentiality w.r.t publication of the research report until made
  available in the public domain.
  D. Details of grievance redressal mechanism and how to access it In case of any grievance / complaint, an investor should approach the concerned Research Analyst and shall ensure that the grievance is resolved within 30 days. If the investor’s complaint is not redressed satisfactorily, one may lodge a complaint with SEBI on SEBI’s SCORES portal which is a centralized web based complaints redressal system. SEBI takes up the complaints registered via SCORES with the concerned intermediary for timely redressal. SCORES facilitates tracking the status of the complaint.

With regard to physical complaints, investors may send their complaints to: Office of Investor Assistance and Education, Securities and Exchange Board of India, SEBI Bhavan, Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. E. Expectations from the investors (Responsibilities of investors)

• Do’s
  i. Always deal with SEBI registered Research Analyst.
  ii. Ensure that the Research Analyst has a valid registration certificate.
  iii. Check for SEBI registration number.
  iv. Please refer to the list of all SEBI registered Research Analysts which is
  available on SEBI website in the following link:
  https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=y es&intm Id=14)
  v. Always pay attention towards disclosures made in the research reports
  before investing.
  vi. Pay your Research Analyst through banking channels only and maintain duly
  signed receipts mentioning the details of your payments.
  vii. Before buying securities or applying in public offer, check for the research
  recommendation provided by your Research Analyst.
  viii. Ask all relevant questions and clear your doubts with your Research Analyst
  before acting on the recommendation.
  ix. Inform SEBI about Research Analyst offering assured or guaranteed returns.
• Don’ts
  i. Do not provide funds for investment to the Research Analyst.
  ii. Don’t fall prey to luring advertisements or market rumors.
  iii. Do not get attracted to limited period discount or other incentive, gifts, etc.
  offered by Research Analyst.
  iv. Do not share login credential and password of your trading and demat
  accounts with the Research Analyst.

ANNEXURE B
COMPLAINT DATA TO BE DISPLAYED BY RAs
Formats for investors complaints data to be disclosed monthly by RAs on their website/mobile application:
Data for the month ending -_____________
Sr.
No.
Received from
Pending at the end of last month
Receiv ed
Resol ved*
Total
Pend ing#
Pending complaints

3months
Average
Resolution time^ (in days)
1 Directly from
Investors
2 SEBI
(SCORES)
3 Other
Sources (if any)
Grand
Total

• Inclusive of complaints of previous months resolved in the current month.

Inclusive of complaints pending as on the last day of the month.

^ Average Resolution time is the sum total of time taken to resolve each complaint in days, in the current month divided by total number of complaints resolved in the current month. Trend of monthly disposal of complaints Sr. No. Month Carried forward from previous month Received Resolved* Pending# 1 April, YYYY 2 May, YYYY

3 June, YYYY
4 ……………..
5 March, YYYY
Grand Total

• Inclusive of complaints of previous months resolved in the current month.

Inclusive of complaints pending as on the last day of the month.

Trend of annual disposal of complaints
Sr.
No.
Year Carried forward from previous year
Received Resolved* Pending#
1 2018-19
2 2019-20
3 2020-21
4 20XX-XX
Grand Total

• Inclusive of complaints of previous years resolved in the current year.

Inclusive of complaints pending as on the last day of the year.

ANNEXURE C
ADVISORY FOR FINANCIAL SECTOR ORGANIZATIONS REGARDING SOFTWARE AS A SERVICE (SaaS) BASED SOLUTION TLP:AMBER CERT-Fin Advisory- 201155100308 Advisory for Financial Sector Organisations - RBI and SEBI Overview It has been learnt that some of the financial sector institutions are availing or thinking of availing Software as a Service (SaaS) based solution for managing their Governance, Risk & compliance (GRC) functions so as to improve their cyber security posture. Many a time the risk & compliance data of the institution moves cross border beyond the legal and jurisdictional boundary of India due to the nature of shared cloud SaaS. While SaaS may provide ease of doing business and quick turnaround, it also brings significant risk to the overall health of India's financial sector with respect to data safety and security. Description If the following data sets fall in the hands of an adversary/cyber attacker, it may lead to unprecedented increase in the attack surface area and weakening of Indian financial sector infrastructure's overall resilience.

• Credit Risk Data

• liquidity Risk Data

• Market Risk Data

• System & Sub-System Information

• Internal & Partner IP Schema

• Network Topography & Design

• Audit/Internal Audit Data

• System Configuration Data

• System Vulnerability Information

• Risk Exception Information

• Supplier Information & it's dependencies related Data
  Solution
  The Financial Sector organisations may be advised to protect such critical data using layered defence approach and seamless protection against external or insider threat. The organisations may also be advised to ensure complete protection & seamless control over their critical system by continuous monitoring through direct control and supervision protocol mechanisms while keeping such critical data within the legal boundary of India. The organisations may also be requested to report back to their respective regulatory authority regarding compliance to this advisory. It is requested that you may kindly keep CERT-In informed of the actions taken and periodically provide the updated compliance to this advisory. (It may be noted that TLP Amber means: limited disclosure, restricted to participants' organizations. When should be used: Sources may use TLP:AMBER when information requires support to be effectively acted upon, yet carries risks to privacy, reputation, or operations if shared outside of the organizations involved. How may it be shared: Recipients may only share TLP:AMBER information with members of their own organization, and with clients or customers who need to know the information to protect themselves or prevent further harm. Sources are at liberty to specify additional intended limits of the sharing: these must be adhered to.)

ANNEXURE D
DECLARATION CUM UNDERTAKING FOR SEEKING PRIOR APPROVAL FOR CHANGE IN CONTROL We M/s. (Name of the intermediary/the acquirer/person who shall have the control), hereby declare and undertake the following with respect to the application for prior approval for change in control of (name of the intermediary along with the SEBI registration no.):

1. The applicant/intermediary (Name) and its principal officer, the directors or managing
   partners, the compliance officer and the key management persons and the promoters or persons holding controlling interest or persons exercising control over the applicant, directly or indirectly (in case of an unlisted applicant or intermediary, any person holding twenty percent or more voting rights, irrespective of whether they hold controlling interest or exercise control, shall be required to fulfill the ‘fit and proper person’ criteria) are fit and proper person in terms of Schedule II of SEBI (Intermediaries) Regulations, 2008.
2. We bear integrity, honesty, ethical behaviour, reputation, fairness and character.
3. We do not incur following disqualifications mentioned in Clause 3(b) of Schedule II of
   SEBI (Intermediaries) Regulations, 2008 i.e.
   (i) No criminal complaint or information under section 154 of the Code of Criminal Procedure, 1973 (2 of 1974) has been filed against us by the Board and which is pending. (ii) No charge sheet has been filed against us by any enforcement agency in matters concerning economic offences and is pending. (iii) No order of restraint, prohibition or debarment has been passed against us by the Board or any other regulatory authority or enforcement agency in any matter concerning securities laws or financial markets and such order is in force. (iv) No recovery proceedings have been initiated by the Board against us and are pending. (v) No order of conviction has been passed against us by a court for any offence

involving moral turpitude.
(vi) No winding up proceedings have been initiated or an order for winding up has been passed against us. (vii) We have not been declared insolvent. (viii) We have not been found to be of unsound mind by a court of competent jurisdiction and no such finding is in force. (ix) We have not been categorized as a wilful defaulter. (x) We have not been declared a fugitive economic offender.
4. We have not been declared as not ‘fit and proper person’ by an order of the Board.
5. No notice to show cause has been issued for proceedings under SEBI(Intermediaries)
Regulations, 2008 or under section 11(4) or section 11B of the SEBI Act during last one year against us.
6. It is hereby declared that we and each of our promoters, directors, principal officer,
compliance officer and key managerial persons are not associated with vanishing companies.
7. We hereby undertake that there will not be any change in the Board of Directors of
incumbent, till the time prior approval is granted.
8. We hereby undertake that pursuant to grant of prior approval by SEBI, the incumbent
shall inform all the existing investors/ clients about the proposed change prior to effecting the same, in order to enable them to take informed decision regarding their continuance or otherwise with the new management. The said information is true to our knowledge. (stamped and signed by the Authorised Signatories)

ANNEXURE E
PRINCIPLES FOR OUTSOURCING FOR INTERMEDIARIES

1. An intermediary seeking to outsource activities shall have in place a
   comprehensive policy to guide the assessment of whether and how those activities can be appropriately outsourced. The Board / partners (as the case may be) {hereinafter referred to as the “the Board”} of the intermediary shall have the responsibility for the outsourcing policy and related overall responsibility for activities undertaken under that policy.
   1.1. The policy shall cover activities or the nature of activities that can be
   outsourced, the authorities who can approve outsourcing of such activities, and the selection of third party to whom it can be outsourced. For example, an activity shall not be outsourced if it would impair the supervisory authority’s right to assess, or its ability to supervise the business of the intermediary. The policy shall be based on an evaluation of risk concentrations, limits on the acceptable overall level of outsourced activities, risks arising from outsourcing multiple activities to the same entity, etc.
   1.2. The Board shall mandate a regular review of outsourcing policy for such
   activities in the wake of changing business environment. It shall also have overall responsibility for ensuring that all ongoing outsourcing decisions taken by the intermediary and the activities undertaken by the third-party, are in keeping with its outsourcing policy.
2. The intermediary shall establish a comprehensive outsourcing risk
   management programme to address the outsourced activities and the relationship with the third party.
   2.1. An intermediary shall make an assessment of outsourcing risk which
   depends on several factors, including the scope and materiality of the outsourced activity, etc. The factors that could help in considering materiality

in a risk management programme include￾2.1.1. The impact of failure of a third party to adequately perform the activity on the financial, reputational and operational performance of the intermediary and on the investors / clients;
2.1.2. Ability of the intermediary to cope up with the work, in case of non
performance or failure by a third party by having suitable back-up arrangements;
2.1.3. Regulatory status of the third party, including its fitness and probity
status;
2.1.4. Situations involving conflict of interest between the intermediary and
the third party and the measures put in place by the intermediary to address such potential conflicts, etc.
2.2. While there shall not be any prohibition on a group entity / associate of the
intermediary to act as the third party, systems shall be put in place to have an arm’s length distance between the intermediary and the third party in terms of infrastructure, manpower, decision-making, record keeping, etc. for avoidance of potential conflict of interests. Necessary disclosures in this regard shall be made as part of the contractual agreement. It shall be kept in mind that the risk management practices expected to be adopted by an intermediary while outsourcing to a related party or an associate would be identical to those followed while outsourcing to an unrelated party.
2.3. The records relating to all activities outsourced shall be preserved centrally
so that the same is readily accessible for review by the Board of the intermediary and / or its senior management, as and when needed. Such records shall be regularly updated and may also form part of the corporate governance review by the management of the intermediary.
2.4. Regular reviews by internal or external auditors of the outsourcing policies,
risk management system and requirements of the regulator shall be

mandated by the Board wherever felt necessary. The intermediary shall review the financial and operational capabilities of the third party in order to assess its ability to continue to meet its outsourcing obligations.
3. The intermediary shall ensure that outsourcing arrangements neither
diminish its ability to fulfill its obligations to customers and regulators, nor impede effective supervision by the regulators.
3.1. The intermediary shall be fully liable and accountable for the activities that
are being outsourced to the same extent as if the service were provided in￾house.
3.2. Outsourcing arrangements shall not affect the rights of an investor or client
against the intermediary in any manner. The intermediary shall be liable to the investors for the loss incurred by them due to the failure of the third party and also be responsible for redressal of the grievances received from investors arising out of activities rendered by the third party.
3.3. The facilities / premises / data that are involved in carrying out the outsourced
activity by the service provider shall be deemed to be those of the registered intermediary. The intermediary itself and Regulator or the persons authorized by it shall have the right to access the same at any point of time.
3.4. Outsourcing arrangements shall not impair the ability of SEBI/SRO or
auditors to exercise its regulatory responsibilities such as supervision/inspection of the intermediary.
4. The intermediary shall conduct appropriate due diligence in selecting the
third party and in monitoring of its performance.
4.1. It is important that the intermediary exercises due care, skill, and diligence in
the selection of the third party to ensure that the third party has the ability and capacity to undertake the provision of the service effectively.
4.2. The due diligence undertaken by an intermediary shall include assessment

of:
4.2.1. third party’s resources and capabilities, including financial
soundness, to perform the outsourcing work within the timelines fixed;
4.2.2. compatibility of the practices and systems of the third party with the
intermediary’s requirements and objectives;
4.2.3. market feedback of the prospective third party’s business reputation
and track record of their services rendered in the past;
4.2.4. level of concentration of the outsourced arrangements with a single
third party; and
4.2.5. the environment of the foreign country where the third party is
located.
5. Outsourcing relationships shall be governed by written contracts /
agreements / terms and conditions (as deemed appropriate) {hereinafter referred to as “contract”} that clearly describe all material aspects of the outsourcing arrangement, including the rights, responsibilities and expectations of the parties to the contract, client confidentiality issues, termination procedures, etc.
5.1. Outsourcing arrangements shall be governed by a clearly defined and legally
binding written contract between the intermediary and each of the third parties, the nature and detail of which shall be appropriate to the materiality of the outsourced activity in relation to the ongoing business of the intermediary.
5.2. Care shall be taken to ensure that the outsourcing contract:
5.2.1. clearly defines what activities are going to be outsourced, including
appropriate service and performance levels;

5.2.2. provides for mutual rights, obligations and responsibilities of the
intermediary and the third party, including indemnity by the parties;
5.2.3. provides for the liability of the third party to the intermediary for
unsatisfactory performance/other breach of the contract
5.2.4. provides for the continuous monitoring and assessment by the
intermediary of the third party so that any necessary corrective measures can be taken up immediately, i.e., the contract shall enable the intermediary to retain an appropriate level of control over the outsourcing and the right to intervene with appropriate measures to meet legal and regulatory obligations;
5.2.5. includes, where necessary, conditions of sub-contracting by the
third-party, i.e. the contract shall enable intermediary to maintain a similar control over the risks when a third party outsources to further third parties as in the original direct outsourcing;
5.2.6. has unambiguous confidentiality clauses to ensure protection of
proprietary and customer data during the tenure of the contract and also after the expiry of the contract;
5.2.7. specifies the responsibilities of the third party with respect to the IT
security and contingency plans, insurance cover, business continuity and disaster recovery plans, force majeure clause, etc.;
5.2.8. provides for preservation of the documents and data by third party;
5.2.9. provides for the mechanisms to resolve disputes arising from
implementation of the outsourcing contract;
5.2.10. provides for termination of the contract, termination rights, transfer
of information and exit strategies;

5.2.11. addresses additional issues arising from country risks and potential
obstacles in exercising oversight and management of the arrangements when intermediary outsources its activities to foreign third party. For example, the contract shall include choice-of-law provisions and agreement covenants and jurisdictional covenants that provide for adjudication of disputes between the parties under the laws of a specific jurisdiction;
5.2.12. neither prevents nor impedes the intermediary from meeting its
respective regulatory obligations, nor the regulator from exercising its regulatory powers; and
5.2.13. provides for the intermediary and /or the regulator or the persons
authorized by it to have the ability to inspect, access all books, records and information relevant to the outsourced activity with the third party.
6. The intermediary and its third parties shall establish and maintain
contingency plans, including a plan for disaster recovery and periodic testing of backup facilities.
6.1. Specific contingency plans shall be separately developed for each
outsourcing arrangement, as is done in individual business lines.
6.2. An intermediary shall take appropriate steps to assess and address the
potential consequence of a business disruption or other problems at the third party level. Notably, it shall consider contingency plans at the third party; co￾ordination of contingency plans at both the intermediary and the third party; and contingency plans of the intermediary in the event of non-performance by the third party.
6.3. To ensure business continuity, robust information technology security is a
necessity. A breakdown in the IT capacity may impair the ability of the intermediary to fulfill its obligations to other market participants/clients/regulators and could undermine the privacy interests of

its customers, harm the intermediary’s reputation, and may ultimately impact on its overall operational risk profile. Intermediaries shall, therefore, seek to ensure that third party maintains appropriate IT security and robust disaster recovery capabilities.
6.4. Periodic tests of the critical security procedures and systems and review of
the backup facilities shall be undertaken by the intermediary to confirm the adequacy of the third party’s systems.
7. The intermediary shall take appropriate steps to require that third parties
protect confidential information of both the intermediary and its customers from intentional or inadvertent disclosure to unauthorised persons.
7.1. An intermediary that engages in outsourcing is expected to take appropriate
steps to protect its proprietary and confidential customer information and ensure that it is not misused or misappropriated.
7.2. The intermediary shall prevail upon the third party to ensure that the
employees of the third party have limited access to the data handled and only on a “need to know” basis and the third party shall have adequate checks and balances to ensure the same.
7.3. In cases where the third party is providing similar services to multiple entities,
the intermediary shall ensure that adequate care is taken by the third party to build safeguards for data security and confidentiality.
8. Potential risks posed where the outsourced activities of multiple
intermediaries are concentrated with a limited number of third parties. In instances, where the third party acts as an outsourcing agent for multiple intermediaries, it is the duty of the third party and the intermediary to ensure that strong safeguards are put in place so that there is no co-mingling of information /documents, records and assets.

VII. APPENDIX: LIST OF CIRCULARS / NOTIFICATIONS/ COMMUNICATIONS
Sr.
No.
Circular/ Notification No. Date Subject
1 Cir/ ISD/1/2011 23-Mar-11 Unauthenticated news circulated by SEBI Registered Market Intermediaries through various modes of communication 2 CIR/ISD/2/2011 24-Mar-11 Addendum to Circular no. Cir/ISD/1/2011 dated March 23, 2011 3 CIR/MIRSD/24/2011 15-Dec-11 Guidelines on Outsourcing of Activities by Intermediaries 4 CIR/MIRSD/5/2013 27-Aug-13 General Guidelines for dealing with Conflicts of Interest of Intermediaries and their Associated Persons in Securities Market 5 CIR/MIRSD/3/2014 28-Aug-14 Information regarding Grievance Redressal Mechanism 6 CIR/MIRSD/2/2015 26-Aug-15 Implementation of the Multilateral Competent Authority Agreement and Foreign Account Tax Compliance Act 7 CIR/MIRSD/3/2015 10-Sep-15 Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS)-Guidance Note 8 SEBI/HO/IMD/DF1/CIR/P/ 2020/147 03-Aug-20 Procedural Guidelines for Proxy Advisors 9 SEBI/HO/CFD/CMD1/CIR/ P/2020/119 04-Aug-20 Grievance Resolution between listed entities and proxy advisers 10 SEBI/HO/IMD/DF1/CIR/P/ 2020/157 27-Aug-20 Procedural Guidelines for Proxy Advisors’ - Extension of implementation timeline 11 SEBI/HO/CFD/CMD1/CIR/ P/2020/159 27-Aug-20 Grievance Resolution between listed entities and proxy advisers’ –Extension of timeline for implementation 12 SEBI/HO/MIRSD2/DOR/C IR/P/2020/221 03-Nov-20 Advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions 13 SEBI/HO/IMD/DF1/CIR/P/ 2020/256 31-Dec-20 Procedural Guidelines for Proxy Advisors

Sr.
No.
Circular/ Notification No. Date Subject
14 SEBI/HO/IMD/IMD-II
CIS/P/CIR/2021/0685
13-Dec-21 Publishing of Investor Charter and disclosure of Investor Complaints by Research Analysts on their websites/mobile applications 15 SEBI/HO/DEPA-III/DEPA￾III_SSU/P/CIR/2022/25 25-Feb-22 Approach to securities market data access and terms of usage of data provided by data sources in Indian securities market 16 SEBI/HO/MIRSD/ MIRSD￾PoD-2/P/CIR/2022/163 28-Nov-22 Procedure for seeking prior approval for change in control 17 SEBI/HO/MIRSD/ MIRSD-PoD￾2/P/CIR/2023/51 05-Apr-23 Advertisement code for Investment Advisers (IA) and Research Analysts (RA) 18 SEBI/HO/MIRSD/ MIRSD-PoD￾2/P/CIR/2023/52 06-Apr-23 Usage of brand name/trade name by Investment Advisers (IA) and Research Analysts (RA) *