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SEBI has provided clarity on the scope of advice given by registered investment advisors (RIAs)
In its board meeting held today, SEBI said that RIAs can only deal with security market products regulated by SEBI. This means RIAs cannot offer other services like estate planning, will making and tax planning, which are part and parcel of the comprehensive financial plan.
In its draft regulations, SEBI did propose that RIAs can deal with unregulated products only after creating a separate company and maintaining arm’s length relationship with that entity.
Another major development is that stock tippers (largely Indore, Bhopal and Jaipur based stock tipping companies) cannot call themselves RIAs. They will have to obtain a research analyst license to offer such services.
SEBI has also relaxed certain norms for RIAs to facilitate ease of doing business. Let us look at them:
- A person having a graduate degree can become an individual RIAs or principal officer of a RIA firm
- Further, there is no need to have prior experience to become RIAs or associate with RIAs (employees)
- No recurring examination at the time of renewal. While applicants have to obtain NISM XA and XB examination to get RIA license, a certification on incremental changes and development will be sufficient for renewal
- Increase in number of clients from 150 to 300 for corporatization of business for individual RIAs
- Insurance agents, CAs and other professionals like teachers who are not directly related to the securities markets to become part time registered investment advisers (RIAs)
- Reduced net worth requirement for both individuals and corporates
- RIAs can now change the mode of charging fees for a client at any time without any restriction. RIAs are allowed to offer two models on fees Rs.1.25 lakh per annum or 2.50% per annum on assets under advisory.
