Corporate advisers need to have
a net worth of Rs 25 lakh while individuals will need to have Rs 1 lakh.
SEBI has come out with the much awaited investment adviser regulations yesterday. These regulations will be enforced from the 90th day from the date of the publication of these rules in the official gazette.
Qualification & Certification
-
Advisers
will be required to hold a professional qualification or post-graduate degree
or post graduate diploma in finance, accountancy, business management,
commerce, economics, capital market, banking, insurance or actuarial science.
- Alternatively,
advisers having a graduate in any discipline with experience of at least five
years in financial advisory or securities or fund or asset or portfolio
management are also qualified.
- Advisers,
their partners and their representatives should have a certification on
financial planning or fund or asset or portfolio management or investment advisory
services from NISM or from any other organization or institution including
Financial Planning Standards Board India (FPSB) or stock exchange provided that
such certification is accredited by NISM.
- Existing
advisers and their representatives seeking registration under these regulations
will have to obtain certification within two years from the date of commencement
of adviser regulations. Advisers whose existing certificates which are due for
expiry need to also obtain the above mentioned certification to continue their
practice.
Capital adequacy
SEBI has also
laid down capital adequacy requirements for corporate and individual
distributors. Corporate distributors will require a minimum net worth of Rs 25
lakh while individuals and partnership firms will require to posses tangible
assets worth at least Rs 1 lakh.
Registration
After
complying with the investment adviser regulations, advisers would need to
register with SEBI by paying a non-refundable application fee of Rs. 5000. Individual
advisers will have to shell out a registration fee of Rs 10,000 while corporate
will have to cough up Rs 1 lakh in addition to the application fee. This
certificate will be valid for a period of three years.
Responsibilities
- Advisers will now have to act in a fiduciary responsibility
towards their clients. Investment adviser can only get a fee from their
clients. If advisers are engaged in any other activities in addition to
giving investment advice they will have to maintain an arm’s length
relationship with such activities. They will have to disclose to their
clients if there are any conflict of interest in connection with other
activities. Advisers will not be allowed to disclose any confidential
information regarding any client to others without taking prior approval
from clients.
- Further, advisers won’t be able to enter into
any transaction on its own account which is contrary to the advice given
to the client. They can do so after informing their clients 24 hours in
advance.
- Advisers would require to do customers risk
profiling before giving any advice. They will also have to document these
processes.
- Advisers will have to disclose the key
features of the products, their risks, warnings and their performance
track record to their clients.
Record Maintenance
Advisers will
have to maintain the following records:
- Know Your Client records of the client
- Risk profiling and risk assessment of the client
- Suitability assessment of the advice being provided
- Copies of agreements with clients
- Investment advice provided, whether written or oral
- Rationale for arriving at investment advice, 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
- All 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 are maintained in electronic form, such records shall be digitally signed.
- Advisers will have to appoint auditors to ensure compliance with these rules every year.
To read the Gazette notification, click here.
