SEBI’s proposes draft regulations on investment advisors

An investment advisor should work with due skill, care and diligence, in the best interests of its clients

January 01, 1970 5:30 IST | India Infoline News Service
Capital market regulator SEBI (Securities and Exchange Board of India) has proposed code of conduct for investment advisors. The memorandum—SEBI (Investment Advisors) Regulations, 2012—seeks consideration and approval of the Board for the same. Below is the code of conduct suggested by the regulator for investment advisors.
Honesty and fairness: An investment advisor shall act honestly, fairly, and in the best interests of its clients and the integrity of the market.

Diligence: An investment advisor shall act with due skill, care and diligence, in the best interests of its clients and in providing the advice it shall ensure that its advice is based on thorough analysis and after taking into account available alternatives.

Capabilities: An investment advisor shall have and employ effectively the resources and procedures which are needed for the proper performance of its business activities.

Information about clients: An investment advisor shall seek from its clients, information about their financial situation, investment experience and investment objectives relevant to the services to be provided and maintain confidentiality of such information.

Information for clients: An investment advisor shall make adequate disclosure of relevant material information in its dealings with its clients.

Fair & reasonable charges: An investment advisor advising a client may charge fee, subject to the ceiling specified by the board, if any, which shall be fair and reasonable in the circumstances and be characterized by good faith and shall not exceed the ceiling as may be specified.

Conflicts of interest: An investment advisor shall try to avoid conflicts of interest, and when they cannot be avoided, should ensure that appropriate disclosures are made to the clients and that the clients are fairly treated.

Compliance: An investment advisor including its representative(s) shall comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of clients and the integrity of the market.

Responsibility of senior management: The senior management of a body corporate which is registered as investment advisor shall bear primary responsibility for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by the body corporate.

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