SEBI

Requirements for Investment Advisors Registration with SEBI

The Investment advisors are the ones who have an obligation to provide financial advice to the firms or individuals with a high net worth or increased investment or manages their portfolio.

Features of Investment Advisors under SEBI of India

a. They are regulated directly by the Securities Exchange Board of India (SEBI).
b. Registered Investment Advisors acts in the fiduciary capacity.

c. The registered investment advisors have to disclose possible conflicts of interests to their clients.
d. They charge the client percentage of their assets under management (AUM).
e. They have to get registered for their practices and must obtain license series 65 in the USA but in India, an investment advisor has to get registered under SEBI IA Regulations, 2013.
f. To increase transparency in their service, a Separate Investment Advisory Agreement Service through circular is provided by the Commission.

Comparison of Investment Advisors under SEBI with the concept in the USA

As defined in The Investment Advisors Act, 1940, RIA (Registered Investment Advisor) is a person or firm that for some consideration is involved in providing advice making recommendations, issuing reports, furnishing analysis on securities, either directly or indirectly via publication.

An investment advisor has to get registered with the Securities Exchange Commission (SEC)^[1].

A registered investment advisor is not the one who is going to recommend or endorse SEC or state securities regulators. It merely implies that the RIA has fulfilled the registration process under the Commission, which is registered under the SEC.

The Registered investment advisors have to give the investment advice best to their knowledge and ability and an investment that always interests them.

Requirements to register as Investment Advisor under SEBI

• Register in Form-A

The applicant to get registered, under the Investment Adviser (Regulation), 2013, has to make an application to SEBI under FORM-A, with the supporting documents.

• Reply within 1 month

The applicant will receive a reply within one month from SEBI, on receipt of the application.

• Check Eligibility on Investment Advisor under SEBI Website

For checking the eligibility requirements, I A (INVESTMENT ADVISOR) one has to go on the SEBI Investment Advisors Regulation 2013.

• Cover Letter Details

1. The applicant has to provide on the cover letter the following details, which includes:
2. That the applicant provided investment advisory services, before the application.
3. Details of the investment advice, provided before filing the application.
4. Provide details for being a new investment advisor.

• Submission of fees

The applicant will have to submit a fee of Rs. 5000 by way of bank draft in favour of the Securities Exchange Board of India. With this submit the Form-A, which is duly signed, stamped and numbered appropriately.

• Registration of Form Online

The applicant has to make the registration of the form online with SEBI from time to time basis.

• Certificate of Registration

SEBI shall consider the guidelines and the requirements specified in the Regulation for granting registration. SEBI, on being satisfied, from the applicant that it complies with the requirements, approves the application on receipt of the payment of the fees and shall grant a certificate of registration.

• Applicant is Corporate

If the applicant is corporate, it shall take a registration fee of Rs.1, 00,000/- on receipt of approval. If the applicant is an individual, the SEBI shall take a fee of Rs. 10,000/- by way of bank draft in favour of Securities Exchange Board of India.

• Receipt of Fees

After receipt of fees, the SEBI will grant a Certificate of Registration as an investment advisor.

• Check Website

The Investment Advisor has to check the SEBI website for regular updates on the notifications and the circulars released.

SEBI (Investment Advisers) Regulation 2013

The concept of Investment Advisors under SEBI via legislative enactment came in India on January 21, 2013.

The aim of the regulations is to:

1. To specify conditions for registration
   • Certification
   • Capital
   • Adequacy
   • Risk profiling
   • Code of conduct
   • Records to be maintained.
2. The aim of the Act is to make sure no person shall hold or act as an investment advisor unless he has obtained the certificate of registration from SEBI on and from the commencement of IA Regulations.
3. If a person acts as an investment advisor without holding the certificate of registration, appropriate action is can be initiated under the Act.

Investment advice as per the Act

Any advice related to the investing, purchasing, selling, or dealing in securities, or investment products, and advice on investment portfolio, containing securities, or investment products, whether in written or oral for the benefit of the client which includes financial planning.

Which is not included in investment advice?

The advice which is given through newspaper, magazines, any electronic, broadcasting medium which is widely available, to the public shall not be considered as the investment advice under Investment Advisors Regulation, 2013.

Who is required to make an application of Investment Advisor under SEBI Regulations?

Any person who is willing to engage in the business of providing investment advice to clients or to other persons, or group who is required to make an application to get registration under IA Regulations.

The Regulation exempts certain persons, such as insurance brokers, agents, pension advisers, mutual fund distributors, stockbrokers, sub-brokers, portfolio managers, fund managers, advocates, solicitors, firm, from obtaining registration under REGULATION 4 of IA Regulations.

Whether Bank or NBFC which undertakes, Investment Advisory Services is required to get registered?

Yes, the bank or NBFC which is undertaking to provide advisory services is required to get registered under the Investment Advisory Regulations 2013.
However, it has to take permission from the Reserve Bank of India, and then it shall make an application to get registered under the Regulations of 2013.

How long the Certificate of Registration is is valid?

The certificate of registration of an investment advisor is valid for 5 years or till it is suspended. The renewal certificate has to be applied 3 months before the expiry of the registration to the SEBI.

What are the qualifications and Certifications which are required to be investment advisors?

As specified under Regulation 7(1) and 7(2) of the IA Regulations. An individual registered and partners and representatives of the Investment Advisor who are rendering investment advice on behalf of the investment adviser shall fulfill the minimum qualifications.

About the certification requirement, the said person is required to obtain Nism-Series-X-A: Investment Advisor Leevl 1 and Nism-Series–X-B: Investment Advisor Level 2.

Conclusion

It can be concluded that registration of Investment Advisors with SEBI as per the regulations of 2013. The rules are made to promote transparency between the advisors and their respective customers. This Regulation keeps a check on the fraudulent activities of the investment and advisors.

Read our article:SEBI Investment Advisors Amendment Regulations 2020