SEBI has allowed stock exchanges to propose a subsidiary that would regulate registered investment advisors (RIAs).
In a recent circular, the market regulator said, “Considering the growing number of RIAs, it is decided to recognize a wholly-owned subsidiary of the stock exchange (stock exchange subsidiary) to administer and supervise investment advisors registered with SEBI.”
Further, SEBI has put in place the criteria for a stock exchange subsidiary to become the regulator of RIAs. SEBI said that the recognition of the stock exchange subsidiary will be based on the eligibility of its parent entity i.e. the stock exchange. Following are the eligibility criteria laid down for the stock exchange:
- Number of years of existence: Minimum 15 years
- Stock exchanges having a minimum net worth of Rs.200 crore
- Stock exchanges having nation-wide terminals
- Investor grievance redressal mechanism including arbitration
- Capacity for investor service management to be gauged through reach of investor service centers (ISCs). The stock exchange has to have ISCs in at least 20 cities
Moreover, SEBI said that the stock exchanges will either form a subsidiary or designate an existing subsidiary for the purpose of regulating RIAs. The stock exchange subsidiary will have to put in place systems for grievance redressal, administrative action against IAs, maintain data and share information with SEBI. The subsidiary needs to have the necessary infrastructure like adequate office space, equipment and manpower to effectively discharge its responsibilities.
SEBI also laid the responsibilities of the stock exchange's subsidiary. SEBI said they are required to supervise RIAs, including both onsite and offsite, redress grievance of clients and IAs, take administrative action including issuing warning and referring to SEBI for enforcement action. In addition, the subsidiary will have to monitor activities of RIAs by obtaining periodical reports, submit such reports to SEBI and maintain the database of RIAs.
The stock exchanges fulfilling these criteria may submit a detailed proposal to SEBI within 30 days from August 6.
