Under Regulation 26C of SEBI (Research Analysts) Regulations, 2014, what structural segregation rules apply to research services versus distribution activities?

[ A ]An individual research analyst is legally required to distribute insurance and mutual fund products to all research clients.

[ B ]Research and distribution must be merged into a single commercial contract where clients pay mandatory 10% brokerage commissions.

[ C ]An individual research analyst shall not provide distribution services; a non-individual research entity must maintain client-level segregation at the group level, ensuring that the exact same client cannot be offered both research and distribution services within the group.[ CORRECT ]

[ D ]Client segregation applies only when a company is registered in the state of Sikkim.

Takeaway

Option C is correct: An individual research analyst shall not provide distribution services; a non-individual research entity must maintain client-level segregation at the group level, ensuring that the exact same client cannot be offered both research and distribution services within the group.

Derivation

Regulation 26C enforces strict separation to eliminate conflicts of interest: (1) Individual RAs: An individual research analyst (and their family) cannot provide distribution services to clients receiving research services. (2) Non-Individual RAs: Entities must enforce client-level segregation at the group level—meaning the same client cannot receive both research and distribution services from within the group (if receiving research, no distribution fee is earned; if receiving distribution, no research fee is charged). Research must operate as a separate division. This tests Regulation 26C rules. The common trap is assuming bundling is allowed.

Why the others fail

A — An individual research analyst is legally required to distribute insurance and mutual fund products to all research clients.

Individual RAs are explicitly barred by law from offering distribution services to prevent cross-selling commercial bias.

B — Research and distribution must be merged into a single commercial contract where clients pay mandatory 10% brokerage commissions.

Merging research and distribution into a single fee-earning transaction violates core SEBI client-level segregation rules.

D — Client segregation applies only when a company is registered in the state of Sikkim.

Regulation 26C applies nationwide to all SEBI-registered research analysts and corporate groups across all Indian states.