SEBI issued another set of consultation paper on June 22, 2017 for proposed amendments in the SEBI (Investment Advisers) Regulations. Click here to download the same.
SEBI is very keen and is pressing on the mutual fund distributors to get registered as Investment Advisors. Keeping in mind the new entrants, SEBI has proposed reduced registration requirements too.
So, with respect to an entity, which is already registered as an Investment Adviser, here are the proposed changes:
- An entity cannot provide investment advisory and execution services under one company. There needs to be clear segregation between the two activities. Hence there should be separate entities providing investment advisory and execution / distribution / commission based services.
- The investment advisers, who provide advice on various products like securities, insurance, pension etc., need to get registered with / obtain permission from such regulators who regulate the products. E.g. if you are giving advice on insurance products, you may need to get IRDA permission.
For Mutual Fund Distributors: Since “advice” on securities comes under the ambit of SEBI (Investment Advisers) Regulations, 2013, mutual fund distributors will now have to make a choice. If you are already a mutual fund distributor and providing advice on mutual funds, whether for a fee or not, you now need to get registered as Investment Adviser. Once you are registered, you cannot provide distribution services. However you can continue to receive trail commission.
Here are the proposed changes for new applicants who want their company / LLP to get registered as an Investment Advisor:
- The net worth requirement to be reduced to Rs. 10 lakhs. Currently, the requirement is Rs. 25 lacs.
- The application fees to be reduced to Rs. 10,000. Currently, the fees is is Rs. 25,000.
- The registration fees to be reduced to Rs. 1 lac. Currently, the registration fee is Rs. 5 lacs. IAs will receive permanent license from SEBI subject to payment of Rs. 5 lacs as fees every 5 years.
Read more: Investment Advisers get permanent SEBI registration!
- At least one of the employees / representatives / partners will have to fulfill the qualification and certification requirements. All the employees / representatives need not fulfill the requirements and can be a graduate in any field. Currently, all the employees / representatives / partners who provide investment advise need to fulfill qualification and certification requirements.
Read more on SEBI’s qualification requirements.
The requirements for the individuals and partnership firms remain unchanged.
It is clear that SEBI wants more advisers under its regulatory fold and is not leaving any stone unturned. The proposed changes are expected to become regulation in few months. So, advisers, be ready!
If you are looking for professional help regarding application and compliance of Investment Advisers, click here.