Stalwart Advisors has been running an independent equity research service called ‘Treasure Trove’ for over a decade now. 

Following are some stats covering this decadal journey:

Unique subscribers (cumulatively)	1,600 Families
No. of businesses covered	55
Avg. gain on 40 stocks (positive return)	170%
Avg. loss on 15 stocks (negative return)	– 26%
Overall return	28% CAGR (~12 times)

In other words, if someone started with Rs 10 lacs in 2014, did not add any more funds but could execute on research timely, he/she is a crorepati today. Keeping aside the roller coaster, this has been a fulfilling journey for us.

All this while, the firm had zero complaints with the regulator given we have been fully transparent with prospects; before signing up a prospect would get prior access to the guest dashboard with multiple reports, FAQs along with suitability/risk assessment.

During these 10 years, the rules, regulations and their interpretations kept evolving, but somehow we survived it. Further, it is usual for firms to shut their research desk when they become an asset management company via PMS/AIF license (a natural progression). Stalwart got its PMS license two years ago, but we ensured we continue our research desk.

We think writing down our investment thesis & putting it out publicly has forced us to think deeper and also learn better from our investments. Through Treasure Trove we have catered to a niche of smart individual investors who manage their own portfolio, understand the magic of long-term compounding but lack time and/or skill to do deep research by themselves. Many of them may not have large portfolios or the comfort to put Rs 50 Lacs at one go (PMS threshold) and that was the rationale behind continuing the research desk.

Fast forward to today

The regulations are once again overhauled in January 2025. The stated intention behind these reforms is ‘Ease of Doing Business’ but unfortunately the outcome, for a research house focused on the long-term, is diametrically opposite and makes their setup completely unviable.

The link to New Guidelines (21-pager) is shared at the end of this post. But without making it technical, let us explain the impact with a simple analogy:

Imagine you are running a hotel. There are smaller peers who allow their customers to book rooms on an hourly basis, but the industry standard globally is to allow a minimum booking of one day (24 hours), which is what your hotel follows – customer has to pay for at least one full day at the time of check-in.

Now, two new rules are made mandatory for the entire hotel industry:

1. The check-in formalities (documentation), the on-going reporting & audit (compliance) are materially increased.
2. Restricting hotels to NOT charge beyond an hour at the time of check-in.

The first will lead to substantial increase in operational costs, time & effort but is still manageable.

The second one is what makes the longer stay completely unviable. It adds too much friction & discomfort for the customer & service provider to keep knocking the door every hour even though the intention right from start is to stay at least 24 hours or longer.

Coming back to new guidelines, besides adding significant operational & compliance burden, the new guidelines dictate that a research subscription cannot accept more than a quarter’s fee at a time.

Imagine running a bank that lends for 5 years but cannot accept fixed deposits of more than a quarter. The asset-liability mismatch (ALM) with constant roll-over every quarter makes it such a vulnerable business. It is equally bad for customers who otherwise wanted to lock-in attractive rates for long-term FD. As an investor or customer in a bank, you would pray that RBI never does that.

One may wonder if putting an auto-pay can resolve the friction of quarterly renewal? In 2020, accepting the fee via payment gateway was banned for Investment Advisors. This can happen anytime to Research Analysts too.

The additional operating costs & effort for client onboarding (Agreement, KYC, CKYC, etc), benchmarking, validation, audit etc is still manageable. The deal breaker for us is the risk of focus shifting to short-term activity in order to justify quarterly renewals (unintended consequence). We clearly understand that the big money is not in constant buying or selling, but waiting patiently for the right opportunities and then riding them.

Right from the start our average investment horizon has been 3-5 years (in line with our subscription duration). Sure we have been early in some themes and made mistakes too, but this staying power is what eventually led to many 5-10 baggers for us. The unintended consequence of hyper activity will be terrible for our investors – we don’t want to end up becoming another ‘tip-provider’.

Like those hotels who were already offering hourly service, the life of services providing trading & momentum tips hasn’t changed much due to revised rules. It is just the long-term research that is impacted adversely.

Why this post?

We really appreciate the trust our investors have shown in us over the last decade. We owe them a detailed explanation before we shut this down, and that is the only intent behind this post. We are in NO way criticizing the regulatory guidelines. We do understand the on-going situation wherein gullible investors are losing money to false promises & being lured to trade in F&O, inundating the regulator with complaints, while mischiefs from the likes of Indore keep popping up. Policy formulation is complex & collateral damage is a given. Unfortunately, this time it’s us.

With effect from January 08, 2025 (the date of circular), we had to completely stop fresh subscriptions as well as renewals.

We sincerely regret the inconvenience caused due to this development and hope our subscribers understand that this is really beyond our control.

For subscribers with an active subscription, the following FAQs shall address the phasing out, if you have any other queries, please feel free to reach out to us at support@stalwartvalue.com

1. When does the Treasure Trove service stop?

We are making an attempt to phase out in a gradual manner over the next few months providing as much hand holding as possible.

We will continue to publish quarterly updates, new opportunities that we discover, exit notifications etc. at least till mid-year, while also conducting a couple of SA Broadcasts (video/live meetings) to guide on how to conclude.

2. What about the balance fee from the date of closure?

You would get a refund of the balance subscription amount. 
We will reach out at least a month prior to closing, and seek your bank details for processing the refund.

3. I have been a subscriber for a long time and my subscription expired on January 08, 2025 (or anytime later), can I renew till the time service is active?

Unfortunately, No. The new guidelines seem to be applicable on fresh subscriptions as well as renewals.

4. I am an investor in SA’s PMS – Wealth Guardian Fund, does it impact me / fund in any way?

No, the Portfolio Management Service (Wealth Guardian Fund) continues as is and does not get impacted in any way by this new circular for RAs.

Link to SEBI’s New Guidelines for Research Analysts 2025: https://www.sebi.gov.in/legal/circulars/jan-2025/guidelines-for-research-analysts_90634.html