‘SEBI (INVESTMENT ADVISERS) (AMENDMENT) REGULATIONS, 2020”
Securities Exchange Board of India (SEBI) vide Press Release No. PR No.37/2020dated 03rdJuly, 2020 has come out with Amendments to SEBI (Investment Advisers) Regulations, 2013with an aim to strengthen the regulatory framework for investment
In January, 2020, SEBI had issued a Consultation Paper,on Review of RegulatoryFramework for Investment Advisers and sought comments from the public on theproposals and has received public comments.
- Applicability:Ninetieth day from the date of theirpublication in the Official Gazette.
Major key regulatory changes include:
|Segregation of Advisory &Distribution Activities||Implementation services||Agreement between Investment Adviser and client||Fees||Eligibility Criteria for IAs|
- Brief Analysis of Regulatory Changes:
- Segregation of Advisory & Distribution Activities
- at client level to avoid conflict ofinterest.
- individual shall have the option to:
- register as an Investment Adviser or
- provide distribution services as a distributor.
- for investment advisory and distribution services
- maintain an arm’slength relationship between its activities by providing advisory services througha separately identifiable department or division.
- Implementation services
- Investment Advisers are allowed to provide implementation services (Execution)through direct schemes/ products in the securities market.
- Noconsideration can be received directly or indirectly
- Agreement between Investment Adviser and client
- Mandatory agreementbetween Investment Adviser and the client
- for ensuring greater transparency with reference to advisory activities.
shall be in the manner as specified by SEBI.
- Eligibility Criteria for IAs (Investment Adviser)
- Enhanced eligibility criteria for registration as an Investment Adviser
- net worth of Rs.50 lakhs for non-individuals and
- 5 lakhs for individuals.
- Individual investment adviser or a principal officer of a non-individual investmentadviser to have:
- enhanced professional or post-graduate qualification in relevant subjects / or
- relevant experience of five years
- registration with SEBI as non-individual investment adviser:
If Individuals registered as investment advisers whose number of clients exceed150 in total.
To give effect to these proposals the Securities and ExchangeBoard of India (Investment Advisers) (Amendment) Regulations, 2020 have beennotified.
The guidelines dealing with various other issues like key terms and conditions ofInvestment Advisory Services agreement, modes of charging fee, periodicity etc. will beseparately specified through a Circular.
Link of the Circular:
IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.