SEBI-Registered Research Analysts Confront Bank Account Freezes

Research analysts (RAs) are now facing an additional challenge in their risk assessments—the possibility of having their bank accounts indefinitely frozen. Recently, there have been instances where dissatisfied clients have lodged complaints with cyber crime divisions of the police. Acting on limited information, the authorities have responded by restricting access to the analysts’ bank accounts.

"Clients who are unhappy with the investment returns following our recommendations have started filing complaints with the cyber police. The issue is that the police do not recognize that we are SEBI (Securities and Exchange Board of India)-registered professionals whose role is to provide financial advice, not guarantee returns. As a result, they act on the complaint and freeze our accounts without proper verification," said an RA who wished to remain anonymous. The analyst also noted that peers in the industry have reported similar incidents, where their bank accounts were frozen without any opportunity to present their side of the story.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

"The police have even admitted to some of us that they are unaware of what SEBI is," the RA added.

Another complication arises when complaints are filed at distant police stations, making it difficult for the affected analysts to follow up on their cases due to jurisdictional challenges.

A potential relief for RAs could come in the form of a new payment mechanism proposed by SEBI. On January 31, the regulatory body introduced a consultation paper titled "Safe and Efficient Transfers on UPI."

Proposed Payment Mechanism

Under this system, SEBI plans to introduce dedicated UPI addresses for market intermediaries such as RAs, investment advisors (IAs), mutual funds, and brokers to collect their fees. This initiative aims to ensure that investors make payments only to verified SEBI-registered professionals.

The consultation paper highlighted the problem of unregistered entities misleading investors by unlawfully collecting funds, often for personal gain. SEBI stated that it is necessary to curtail such fraudulent activities while enabling investors to identify legitimate intermediaries and make payments securely.

A UPI ID generally consists of a username and a handle, separated by an "@" symbol. The new system proposes that the username be an alphanumeric ID, indicating the specific segment in which the intermediary operates—for example, abc.bkr for a broker or abc.mf for a mutual fund. The handle will integrate @payright with the intermediary’s bank of choice, such as abc.bkr@payrighthdfc.

According to an RA, when analysts raised concerns with SEBI regarding the freezing of their accounts based on unverified complaints, SEBI officials suggested that if these transactions were conducted under the proposed system, they could intervene.

"If our payments go through the new system, SEBI can contact the police, clarify the regulatory framework under which we operate, and help unfreeze our accounts. Additionally, investors can use SEBI’s redressal mechanism to file their grievances," the RA explained.

Existing Payment Platform

SEBI had already launched a centralized payment platform in September 2024, in collaboration with BSE Ltd, to facilitate payments for IAs and RAs. However, the use of this platform is currently optional, though SEBI has encouraged wider adoption.

While this platform offers advantages, some RAs have raised concerns about potential drawbacks.

"There can be delays in payments processed through this system, sometimes by two or three days. This can frustrate investors, leading them to withdraw from the service. Since analysts cannot commence their services before receiving payment, these delays can impact business," the RA noted.