INVESTMENT ADVISER
SEBI (INVESTMENT ADVISERS) REGULATIONS, 2013
1. Application Procedure:
Application in form A with a non-refundable application fee
of Rs. 25,000 (Approx.). Once SEBI approves your application, you need to pay Rs. 5
lacs as registration fees. Certificate valid until suspended or cancelled by the board.
- No Previous application has been made in this regard has been rejected.
- Applicant/ Director/ Principal Officer/ Employee not involved in litigation
connected with the Securities Market or not been convicted or any guilty of any
economic offence.
2. Exemption from Registration:
- A person who gives general comments in good faith on trends in markets
- IRDA registered Insurance agents and brokers
- Pension advisor registered under Pension Fund Regulatory and Development
Authority
- Distributor of mutual funds, registered with some AMC or an organization
recognized by SEBI.
- Advocate, solicitor or law firm providing advice incidental to legal practice.
- CA/ CS/ CWA/ Actuarial
- SEBI registered stock broker or sub-broker, portfolio managers, merchant bankers
- Fund manager of a mutual fund/ AIF
- IA providing advise exclusively to clients based out of India (NRI and PIO not
covered)
Please note: IA providing advice to FPIs needs to be registered.
3. Quantitative Space requirements to be specified:
- Office Space (In Sq Ft)
- Communication Facilities Available
- Systems Support Available (Both Hardware and Software)
- Details of Research Facilities
4. Eligibility Criteria:
- The representatives of the company who are representing as an adviser should
have the following below minimum qualifications:
o A professional qualification or post-graduate degree or postgraduate
diploma in finance, accountancy, business management, commerce,
economics, capital market, banking, insurance or actuarial science from
a university or an institution recognized by the central government or any
state government or a recognised foreign university or institution or
association; or
o A graduate in any discipline with an experience of at least five years in
activities relating to advice in financial products or securities or fund or
asset or portfolio management.
- The representatives of the company who are representing as an adviser should
have the certification on financial planning or fund or asset or portfolio
management or investment advisory services:
o From NISM; or
o From any other organization or institution, including Financial Planning
Standards Board India or any recognized stock exchange in India provided
that such certification is accredited by NISM.
- Compliances officer to be additionally appointed.
5. Capital Adequacy Requirements:
- Twenty Five Lakhs of Net-Worth is required prior to applying for license
6. Conditions of registration:
- Prior approval of SEBI required for change in the status of the Investment adviser.
- A company needs to include the word “investment adviser” in its name.
- If advisory services provided by a separately identifiable department or division
or subsidiary, then such separately identifiable department or division or
subsidiary shall include the words ‘investment adviser’ in its name
7.General Responsibilities relating to clients
- To act in fiduciary responsibilities and disclose all conflict of interests as and
when arise.
- Not to receive any consideration by way of remuneration or compensation or any
other firm from any other person other than the client being advised.
- Separate investment advisory activities from other business activities, in the
manner prescribed.
- Investment advisor not to enter into transactions on its own account which is
contrary to its advance given to clients for a period of 15 days from the day of
such advice:
o Provided that during the period of such fifteen days, if the investment
adviser is of the opinion that the situation has changed, then it may enter
into such a transaction on its own account after giving such revised
assessment to the client at least 24 hours in advance of entering into such
transaction.
- KYC to be done in the manner prescribed by SEBI. (Records to be maintained by
IA)
- Code of Conduct Specified in 3rd Schedule needs to be abided.
- Code of Conduct Specified in 3rd Schedule needs to be abided.
- Risk Profiling: Investment adviser needs to do the risk profiling basis the
following (Records to be maintained by IA):
o Age, Investment objectives, income details, existing investments/ assets,
risk appetite, liability
o Process of assessing the risk that the client can take including the
assessment of client’s capacity for absorbing loss, whether the client is
willing or unwilling to accept the risk of loss of capital.
o Risk profile needs to be communicated after the risk assessment is done.
o Periodical updating of the risk profile.
- Suitability: IA to ensure the following (Records to be maintained by IA):
o Investments advise is appropriate to the risk profile of client
o Documented process for selecting investments for client
o Understanding of the nature and risk of the products or assets selected.
o Client investments objectives are met, the investments selected are
consistent with the risk tolerance and the client has necessary experience
and knowledge to understand the risk involved in the transaction.
Disclosures to clients: Following disclosures to be made to the clients:
o IA to disclose a prospective client, all material information about itself
including its business, disciplinary history, the terms and conditions on
which it offers advisory services, affiliations with other intermediaries
and such other information as is necessary to take an informed decision
on whether or not to avail its services.
o IA to 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
o IA 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.
o IA shall disclose to the client its holding or position, if any, in the financial
products or securities which are subject matter of advice.
o IA 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.
o IA shall, while making an 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.
o An 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.
- Grievances: Adequate procedure for grievance redressal.
8. Record Maintenance:
Record of the following are required to be mandatorily
maintained by the IA in physical or electronic form for 5 years:
- KYC Details, Risk Profiling and Risk Assessment, Suitability Assessment
- Copies of agreements with the clients
- Investment advises provided, whether oral or written along with the rationale
(Duly signed and dated)
- A register or record containing 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
- Audit of this compliance to be done by CA/CS
9. MCA and SEBI Compliances:
-
- Annual audit, Balance sheet, PL to be maintained.
- Half-yearly unaudited results to be submitted to SEBI within 30 days after the
end of the half year
ABOUT THE AUTHOR
CA NANDAN AGARWAL
Brainebox Consultancy Private Limited
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.
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