Rajesh Chheda of Finance Factory shares his experience of being a SEBI regulated Investment Advisor (RIA).
What preparation did you do to register with SEBI as RIA?
Besides arranging for the necessary documents required by SEBI, I didn’t have to do much preparation. I have been in this industry for a quarter century and been through the Harshad Mehta and the Ketan Parekh scams. I think being a professional and trying to act, think and behave like one, with a high level of compliance and ethics has helped.
Is the process of registering complex? If yes, what difficulties did you face?
No, at least in my experience I did not face any difficulties. Be what you are. Don’t try and convert your proprietary concern into a glorified partnership by creating a LLP or a Pvt. Ltd. Company. Don’t try to circumvent SEBI rules.
SEBI has announced 400% hike in registration fee for LLPs, firms and corporates. Do you think the increase in fee would deter IFAs to register with SEBI?
Perhaps
the right types would be attracted. If Rs. 5 lakh is costly, then, what should
a corporate be like?
What are the benefits of registering
with SEBI as RIA?
The advantages are tremendous. You come across as a transparent person. I even got an association with a CFP from USA because I was an RIA.
Financial advisors can continue to charge fee (for making plans, account maintenance etc.) and earn trail fee even if they don't register with SEBI. Why should one register with SEBI?
Better
to register and test yourself in the compliance space. Compliance and
regulations are the order of the day. Despite the regulations, look at the
worst of the financial scams that have happened all around.
What are your views on the cost of
compliance with SEBI's RIA rules?
Over a period of time, cost of compliance is bound to increase. Clients will have to be prepared to pay for the kind of services they receive from RIAs as this has been done in their interests.
Only 156 have registered as RIAs so far.
What are the reasons for a majority of IFAs to not register with SEBI?
I don’t know their mindset. Perhaps fear. Perhaps somewhere down the line they are not yet in line with their practices as deemed by compliance.
SEBI's RIA rules require IAs to have Rs. 25 lakh net worth. What are your views on capital adequacy requirement?
It is some sort of a bank guarantee which SEBI is seeking. Perhaps, today, this net worth is an essentiality before venturing out as an RIA.
What kind of due diligence you have to undertake after being an IA?
Although the due diligence might look onerous, it is not necessarily so. I have been attending the annual meeting of the Million Dollar Round Table for the past 11 years. I have met the top-notch finance professionals from 70+ countries in these conferences. The compliance requirement in Australia, Singapore, UK are far more rigorous than what we have here.
What would be your advice to IFAs who are considering registering with SEBI as RIA?
I would strongly urge IFAs to register with SEBI as this is the future direction.
Cafemutual will feature a series of interviews of SEBI RIAs.
