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SEBI to implement strict norms for investment advisors

The investment advisors would need a certification on financial planning, asset management or any such certification

September 18, 2012 2:41 IST | India Infoline News Service
Capital market regulator SEBI (Securities and Exchange Board of India) is working to implement strict rules for investment advisors to control unfair trade practices. The regulator is also in process to put a cap on fees charged by them, according to media reports.

All investment advisors will have to register with SEBI after payment of required application & registration fees. The regulator eventually wants them to be regulated through a self regulatory organisation (SRO) model.

According to the proposed norms, investment advisors would be required to separate their other businesses from their work as an investment advisor. They would also need to disclose their commissions and rewards that they receive from their clients. Investment advisors may charge fees subject to the limit specified by SEBI.

The investment advisors would also have to disclose to the investor its holding (if any) in the financial product which is subject matter of recommendation. They would have to ensure that their clients are fairly treated and should disclose any confidential information about their clients. They would also have to follow a code of conduct and conduct risk evaluation of the investor.

Investment advisors would be required to maintain written records relating to investment advisory services for five years and conduct audit each year in respect of compliance with regulation. These advisors would need to have an experience of at least five years in fields relating to advice of financial products or portfolio management, apart from other educations qualifications.

The investment advisors would need a certification on financial planning, asset management or any such certification, while existing investment advisors will be given two years time for such certification. Institutional Investment advisers shall have a net-worth of not less than Rs. 25 lakh, while self-employed or partnership firms shall have net-worth of not less than Rs. 5 lakh.

The term investment advisor would include fund managers, mutual funds advisors, advisors of asset management companies and alternative investment funds. The SEBI has approved the proposal and the regulator would soon notify the same, the reports added.


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