NISM Certificate Does Not Authorise Claim Of SEBI Research Analyst Registration: Gujarat High Court

The Gujarat High Court on 4 November held that an NISM certification does not, by itself, authorise a person to represent themselves as a SEBI-registered Research Analyst, as certification from the National Institute of Securities Markets (NISM) and registration with the Securities and Exchange Board of India (SEBI) are separate requirements.

A Bench of Justice Mool Chand Tyagi made the observation while allowing an application filed by the original complainant, Ruzan Arizbhai Khambhata, to vacate interim protection granted to persons accused of falsely representing themselves as SEBI-registered Research Analysts. It observed:

“…it is required to be noted that obtaining a certification from the National Institute of Securities Markets (NISM) and obtaining registration as a Research Analyst with SEBI are two distinct requirements. Mere possession of an NISM certificate, by itself, cannot be construed as registration with SEBI.”

Khambhata alleged that the accused had projected themselves on social media as “SEBI NISM Certified Research Analysts”, creating the impression that they were registered with SEBI despite holding only NISM certifications. They allegedly issued investment recommendations and induced her to pay commissions linked to trading profits.

She relied on SEBI communications confirming that the accused were not registered as Research Analysts. She also pointed out that one of the accused, Preeti Biju, had applied for SEBI registration, but the application was closed due to incomplete information. Subsequently, the accused modified their social media profiles to include the disclaimer “Not SEBI Registered”.

Opposing the application, the accused contended that their NISM certificates had been verified pursuant to the Court's directions and found to be genuine. They also argued that the documents relied upon by the complainant themselves carried the notation “Not SEBI Reg.”.

The State submitted that although the accused had passed the NISM examination, they were not registered with SEBI as Research Analysts or in any other capacity.

The Court noted that Regulation 3(1) of the SEBI (Research Analysts) Regulations, 2014, mandates registration before a person acts or holds themselves out as a Research Analyst, subject to the applicable provisions of the Regulations.

It further observed that the SEBI communications indicating the absence of registration, the subsequent registration application filed by one of the accused and its closure due to incomplete information were relevant circumstances that required consideration during the investigation.

Further, the Bench noted the allegations concerning the accused persons' social media descriptions, subsequent changes to their profiles and representations made to the complainant. It observed:

“Whether such representations were made with dishonest intention, whether the applicant was induced to part with money on the basis thereof, and whether the ingredients of the alleged offences are attracted are matters, which cannot be conclusively determined at this interlocutory stage. The same would require examination of the relevant electronic material, documentary evidence and statements of the persons concerned by the investigating agency.”

Justice Tyagi held that interim protection should not impede a fair and effective investigation, particularly when subsequent material had been brought on record. It found that continuation of the protection was therefore not warranted.

Accordingly, the High Court vacated the interim protection and permitted the investigating agency to proceed in accordance with law.

For Petitioner: Advocates Jubin Bharda and Shaival M Patel

For Respondents: Advocates Devesh K Shah and Jirga Jhaveri