Every time the Securities and Exchange Board of India (Sebi) publishes a paper, a notification or a press release; reactions pour in from stakeholders as to how this change will affect them, and how this change is detrimental, not thought through and sudden. We know that nothing is permanent. Do we need the regulator to remind us of that periodically?
The latest consultation paper on the investment adviser guidelines has at least one new feature: it provides a 3-year window to align to the norms once they are law. It tell me that the powers-that-are, are indeed listening.
In 2013, when the Sebi (Investment Advisers) Regulations came into force—and 9 months were provided for ‘advisers’ to fall in line—many exemptions were provided. For example, mutual fund distributors providing advice incidental to sale of their product, were exempt. The options given were simple: either get commission on the product, or fees from clients. For those in business for a decade or more, commissions—including trail fees—were a substantive amount and could not be forsaken. The new consultation paper specifically proposes that those transitioning to investment adviser continue to be “allowed to receive trail commission for products already distributed subject to disclosures to the clients”. Possibly quells the rumour that trail commission would be abolished sometime soon. However, it clarifies that individuals cannot provide both advisory and execution services—only corporate entities can; and they need to segregate these services through a subsidiary and not a separate division.
