SEBI Permits Investment Advisers and Research Analysts to use Liquid & Overnight Mutual Funds for Mandatory Bank Deposit under Lien [Read Circular]

Through a circular dated August 12, 2025, SEBI now provides IAs and RAs the flexibility to meet their statutory deposit requirements by using units of liquid mutual funds or overnight mutual funds, in addition to the existing option of a bank deposit under lien.

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The regulatory change has been made following representations from industry participants and inputs received through public consultation, with the proposal receiving the SEBI Board’s approval in its meeting held in June 2025.

Under regulation 8 of the SEBI (Investment Advisers) Regulations, 2013, and the SEBI (Research Analysts) Regulations, 2014, IAs and RAs are required to maintain a specified deposit with a scheduled bank, which is to be marked as a lien in favour of the Investment Adviser Administration and Supervisory Body (IAASB) or the Research Analyst Administration and Supervisory Body (RAASB), as applicable.

The deposit serves as a safeguard to ensure regulatory compliance and investor protection.

Pursuant to the amendments notified in the SEBI (Research Analysts) (Amendment) Regulations, 2025 on August 6, 2025 and the SEBI (Investment Advisers) (Amendment) Regulations, 2025 on August 7, 2025, the renewed framework allows IAs and RAs maintain these mandatory deposits either in the form of a bank deposit under lien or in the form of units of liquid or overnight mutual funds, with such units also marked as a lien in favour of IAASB or RAASB, as the case may be.

All concerned IAs and RAs are required to comply with the revised deposit framework by September 30, 2025. The BSE Limited, acting as both IAASB and RAASB has been directed to put in place all necessary systems and procedures to implement the latest requirements and to communicate the same to all registered IAs and RAs.

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SEBI has made the changes utilizing its powers conferred by section 11(1) of the Securities and Exchange Board of India Act, 1992, read with regulation 8 of the IA Regulations and RA Regulations, to safeguard investor interests, promote market development and regulate the securities market effectively.

The provisions of the circular come into effect immediately from the date of its issuance

The circular is accessible on SEBI’s official website under the “Legal → Circulars” section.