investment advisors

SEBI has notified certain amendments to SEBI (Investment Advisors) Regulations 2013.

Gist of these amendments are as follows

A. Segregation of Advisory & Distribution Activities
• Segregation of Advisory & Distribution Activities at client level to avoid conflict of interest.
• An individual shall have the option to register as an Investment Adviser or
provide distribution services as a distributor.
• A non-individual investment adviser shall have client level segregation at group level for investment advisory and distribution services and maintain an arm’s length relationship between its activities by providing advisory services through a separately identifiable department or division.
B. Implementation services
• Investment Advisers are allowed to provide implementation services (Execution) through direct schemes/ products in the securities market. However, no consideration can be received directly or indirectly, at investment adviser’s group or family level for these services.
C. Agreement between Investment Adviser and client
• Mandatory agreement to be entered between Investment Adviser and the client for ensuring greater transparency with reference to advisory activities.
D. Fees
• The fee charged by the Investment Adviser for providing Investment Advice from a client shall be in the manner as specified by SEBI.
E. Eligibility Criteria for IAs
• Enhanced eligibility criteria for registration as an Investment Adviser including net worth of Rs.50 lakhs for non-individuals and Rs. 5 lakhs for individuals.
• Individual investment adviser or a principal officer of a non-individual investment adviser to have enhanced professional or post-graduate qualification in relevant subjects and relevant experience of five years while grandfathering existing Individual Investment Advisers from complying with the enhanced qualification and experience as specified by SEBI.
• Individuals registered as investment advisers whose number of clients exceed 150 in total, shall apply for registration with SEBI as non-individual investment adviser.

https://www.sebi.gov.in/media/press-releases/jul-2020/sebi-notifies-amendments-to-sebi-investment-advisers-regulations-2013_47006.html

investment advisers in IFSC

SEBI has vide its circular dated 9th January, 2020 issued operating guidelines for investment advisers in International Financial Services Centre including net worth requirements, qualifications, annual compliance audit etc.

https://www.sebi.gov.in/legal/circulars/jan-2020/operating-guidelines-for-investment-advisers-in-international-financial-services-centre_45620.html

SEBI (Investment Advisers) Regulations

SEBI has published its FAQs on the SEBI (Investment Advisers) Regulations. Any person who is providing investment advisory services will need to get himself registered with SEBI under these regulations.

“Investment advice” is an advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning.

Provided that the investment advice given through newspaper, magazines, any electronic or broadcasting or telecommunications medium, which is widely available to the public shall not be considered as investment advice for the purpose of IA regulations. However, investment advisers who make public appearance or make recommendations or offer an opinion concerning securities
or public offers through public media while making recommendations through public media, are required to comply with the relevant provisions of these regulations.

Members of the Institute of Company Secretaries of India, Institute of Chartered Accountants of India, Institute of Cost and Works Accountants of India who provide investment advice to their clients incidental to their professional services are exempted from obtaining registration under IA Regulations.

For example :- An advice by a professional CA as a tax consultant to his tax client for investing in ELSS in the course of tax planning will be treated as incidental to his profession as a tax consultant.

However, if they are engaged in providing investment advisory services in securities as an activity or business to clients or investors which is not incidental to their main activity then they are required to get registration as an investment adviser.

The FAQs can be found at this link, here