Investment Advisors registration with SEBI

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Investment Advisors Registration

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An investment Adviser (“IA”) is a person who provides investment advice concerning financial and investment products to its clients for consideration.

SEBI Investment Advisors Regulations, 2013 to govern the activities of investment advisors have been informed by the Securities and Exchange Board of India (SEBI). Certain amendments to the SEBI Registered Investment Advisor (Amendment) Regulations 2020, dated 3 July 2020, have been introduced.
The proposed changes shall apply from the 90th day following the date of publication in the Official Gazette, i.e. 1 October.

Let us understand, at the beginning, who an investment advisor is. An Investment Advisor is a person who provides his clients with investment advice related to investment products for consideration. Unless the individual is exempted from registration, SEBI Investment Advisor Regulations require any individual who works as an Investment Advisor or keeps himself as an Investment Advisor to register himself. These licensed persons or organizations are known as SEBI Registered Investment Advisors (RIAs).

A registered Investment Advisor (RIA) is a person or an entity that provides investment advice to individuals. In the best interest of their clients, RIAs have a fiduciary responsibility towards their clients to provide financial advice. RIAs are registered with the Securities and Exchange Board of India (SEBI), a market regulator. They have more responsibility than mutual fund distributors towards their clients.

Taking into account their priorities, finances, and their current position, RIAs prepare a financial plan for their investors. For their services, they even charge a fee. It is typically a flat fee and a continuing fee for the support they offer for the financial plan. The two forms of fees collected by RIAs are below:

Percentage of assets: This is equivalent to the Mutual Funds Trail Commission. The main difference, however, is that this fee is received directly from the customer, not from the house of the fund. The charges are dependent on the size of the properties. Usually, it is 1 percent of the assets, and the fee comes down as the asset base rises.

Flat rate: This is a fixed fee paid on an annual basis by the advisor. It is fixed by the investor and advisor’s mutual consent.

  • Registration Applicant for an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013 should make an application to SEBI in Form A as provided in the Regulations along with all the necessary supporting documents.

  • In General on receipt of the Application, the applicant will receive a reply from SEBI within one month. Although the time taken for registration depends on how the applicant fulfills all the registration requirements and provides complete information in all respects.

  • In General on receipt of the Application, the applicant will receive a reply from SEBI within one month. Although the time taken for registration depends on how the applicant fulfills all the registration requirements and provides complete information in all respects.

  • Applicant must mention the following in the covering letter:

    • Whether the applicant is providing investment advisory services before these Regulations. If yes, provide details
    • Details of the investment advice provided before such application.
    • It is applying for registration as a new Investment Adviser providing investment advisory services.
  • Along with other information, the applicant will submit the following:

    • Form A correctly filled, numbered, duly signed, and stamped.
    • Along with application fees of Rs. 5,000/- by way of bank draft in favor of “The Securities and Exchange Board of India”, payable at Mumbai.
  • Applicants shall also make an online application in terms of the guidelines as prescribed by SEBI from time to time.

  • After getting registered, the IA must comply with the reporting requirements as specified by SEBI from time to time.

  • The IA must regularly check the SEBI website for any updates/ circulars/ guidelines issued from SEBI from time to time concerning the IA.

  • Investment advisors must intimate to SEBI any material changes in the details already furnished to SEBI within a reasonable period of time.

  • Obligation which is required to be fulfilled by the investment adviser

  • The advisor shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. She/He shall act honestly, fairly, and in the best interests of its clients and the integrity of the market. She/He shall maintain an arms-length relationship between his activities as an investment adviser and other activities. She/He shall also act with due skill, care, and diligence in the best interests of its clients and shall ensure that its advice is offered after thorough analysis and taking into account available alternatives based on risk profiling and suitability of the client An investment adviser required to comply with general obligations & responsibilities such as general responsibility, disclosures to clients, maintenance of records, etc, as specified under chapter III of IA Regulations as well as the code of conduct as specified under the third schedule of IA regulations.

(A) (IA) investment adviser shall disclose to a prospective client, all material information about itself including its business, disciplinary history, the terms and conditions on which it offers advisory services, associating with other intermediaries and such other information as is necessary to make an informed decision on whether or not to avail its services.

(B) Investment adviser shall disclose to its client, any consideration by way of remuneration or compensation or in any other form whatsoever, received or receivable by it or any of its associates or subsidiaries for any distribution or execution services in respect of the products or securities for which the investment advice is provided to the client.

(C) Investment adviser shall, before recommending the services of a stockbroker or other intermediary to a client disclose any consideration by way of remuneration or compensation or in any other form whatsoever, if any, received or receivable by the investment adviser if the client desires to avail the services of such intermediary.

(D) Investment adviser shall disclose to the client its holding or position, if any, in the financial products or securities which are the subject matter of advice.

(E) Investment adviser shall disclose to the client any actual or potential conflicts of interest arising from any connection to or association with any issuer of products/ securities, including any material information or facts that might compromise its objectivity or independence in the carrying on of investment advisory services.

(F) Investment adviser shall, while making investment advice, make adequate disclosure to the client of all material facts relating to the key features of the products or securities, particularly, performance track record.

(G) The investment adviser shall draw the client’s attention to the warnings, disclaimers in documents, advertising materials relating to an investment product which it is recommending to the client.

  • Investment advisers shall redress client grievances promptly.

  • Investment advisers shall have an adequate procedure for expeditious grievance redressal.

  • Grievances of clients about financial products, in which investments have been made based on investment advice, shall fall within the purview of the regulator of such financial product.

  • Resolve the dispute between the investment adviser and his client may be through arbitration or an Ombudsman authorized or appointed for the purpose by any regulatory authority, as applicable.

  • An investment adviser shall maintain the following records, –

    1. (a) Know Your Client records of the client;
    2. (b) Risk profiling and risk assessment of the client;
    3. (c) Suitability assessment of the advice being provided;
    4. (d) Copies of agreements with clients, if any;
    5. (e) Investment advice provided, whether written or oral;
    6. (f) Rationale for arriving at investment advice, duly signed and dated;
    7. (g) A register or record containing the list of the clients, the date of advice, nature of the advice, the products/securities in which advice was rendered, and fee, if any charged for such advice.
  • Records shall be maintained either in physical or electronic form and preserved for a minimum period of five years.

  • Provided that where records are required to be duly signed and if are maintained in electronic form, such records shall be digitally signed.

  • Investment adviser shall conduct a yearly audit in respect of compliance with these regulations from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India.

Investment Advisors Registration

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