SEBI allows use of liquid mutual funds for IAs, RAs

• 14 Aug 2025
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The Securities and Exchange Board of India (SEBI) has permitted investment advisors and research analysts to use liquid mutual funds (MFs) and overnight MFs for fulfilling their mandatory deposit requirements. This move will provide an alternative to scheduled bank deposits.

Overnight MF refers to a kind of debt mutual fund. It invests in overnight securities with a maturity of just one day. At present, investment advisers and research analysts are required to maintain a specified deposit with a scheduled bank. This deposit is marked as a lien in favor of the Investment Adviser Administration and Supervisory Body or the Research Analyst Administration and Supervisory Body, as applicable.

SEBI’s Board approved the proposal in a meeting held on 20 June 2025, based on the industry participants representations and feedback received during public consultations. The regulator notified the amendments to the research analysts rules and investment advisers norms on 6-7 August.

In a circular issued on 12 August 2025, SEBI said, "In order to ensure compliance with the deposit requirements under the norms, IAs and RAs will now maintain a deposit in the form of units of a liquid mutual fund or an overnight mutual fund or as a deposit maintained with a scheduled bank."

The regulator further added that such a deposit will be marked as a lien in IAASB or RAASB’s favour, depending on the case. By 30 September 2025, the investment advisors and research analysts are required to ensure compliance with SEBI’s revised norms. 

BSE - a leading stock exchange that functions as both IAASB and RAASB - has received directions to implement the essential systems and procedures for implementing the new framework’s provisions and bring the same to the registered entities’ notice.

News: Reddiff MoneyWiz