Sebi clarifies rules on change in control for investment advisers, research analysts, KRAs

Markets watchdog Sebi on Friday clarified the rules for transfer and transmission of shareholding among immediate relatives for investment advisers, research analysts, and know your client (KYC) registration agencies (KRAs).

The move aims to streamline regulatory compliance and protect investor interests while ensuring transparency in the functioning of these intermediaries.

With regards to transfer among immediate relatives, Sebi, in its circular, clarified that transferring shares among immediate relatives will not constitute a "change in control." Immediate relatives include spouses, parents, siblings, and children.

On transmission of shareholding, the regulator said transmission of shares, whether to immediate relatives or others, will also not result in a change in control for unlisted body corporate intermediaries.

In the case of proprietary firms, any transfer or inheritance of ownership will be considered a change in control. Further, legal heirs are required to seek Sebi's prior approval and obtain fresh registration in their name.

For partnerships with more than two partners, transfer of ownership among partners will not be treated as a change in control.

If a partner passes away and the partnership deed allows legal heirs to join, the firm will be reconstituted without requiring fresh registration.

However, induction of a new partner will require Sebi's approval.

Incoming shareholders or partners gaining a controlling interest are required to meet "fit and proper person" standards as outlined in Sebi's Intermediaries Regulations, 2008.

The provisions outlined in the circular are effective immediately.