Investment Adviser Registration

An investment adviser is defined by the Securities and Exchange Board of India as an individual or a firm that is in the business of giving advice about securities. Although, an RIA is the actual firm, while the employees of the firm are called Investment Adviser Representatives (IARs).

Under the securities and exchange board of India (Investment advisors) regulation of 2013 investment advisor means any person who for consideration, is engaged in the business of providing investment advice to a client or other persons or group of persons and includes any person who holds out himself as an investment adviser, by whatever name called. He is any person or group that makes investment recommendations or conducts securities analysis in return for a fee. They are also referred to as financial advisors. Will help you register as an investment adviser.

Certain persons such as insurance agents, pension advisors, stockbrokers, mutual fund distributors, fund managers, advocates, law firms, etc are exempted from the investment advisor definition.

“Investment advice” is advice relating to investing in, purchasing, selling, or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning.

Provided that the investment advice for the purpose of IA regulations doesn’t include investment advice given through newspaper, magazines, any electronic or broadcasting or telecommunications medium widely available to the public. But, one who make public appearance or make recommendations or offer an opinion concerning securities or public offers through public media while making recommendations through FAQs on SEBI (Investment Advisers) Regulations, 2013 to public media, are required to comply with the relevant provisions of SEBI (Research Analysts) Regulations, 2014.

Personal cannot act as an investment adviser unless he has obtained a certificate of registration from the Securities and Exchange Board of India (SEBI). No person can act as an advisor without obtaining a proper certificate, If any person is found to be engaged in providing investment advisory services without getting registered with SEBI, appropriate actions as deemed fit may be initiated under the Act of 1992.

An individual shall have the following minimum qualifications:

• Professional qualification or post-graduate degree or diploma in finance, accountancy, business management, commerce, economics , capital market , banking, insurance or
• Graduate in any discipline with at least 5 year experience relating to advice in financial products or securities or funds or assets or portfolio management.

Person shall have a certification on financial planning or fund or asset or portfolios from (a)National Institute of Security Markets (NISM) , (b) Or any other organization including Financial Planning Standards Board India (FPSB) accredited by NISM.

Post-graduate in finance related topics or graduate in any discipline with five year experience in financial sector can pass the following 2 examinations Level-1 and Level-2 by NISM and apply to SEBI for registration as an Investment Adviser.

The SEBI (Investment Advisers) Regulation, 2013 regulates conditions for registration, certification, capital adequacy, code of conducts, etc.

The Regulation requires the Investment Advisers – banks, non-banking financial companies (NBFCs ), and corporate to segregate their investment advisory services.

FEES & CAPITAL STRUCTURE:

Fees structure and capital adequacy requirement for getting registered as an investment adviser is as under:

The registration application shall be made in Form A as specified in the First Schedule of IA Regulations with necessary supporting documents. The procedure for obtaining registration as an Investment Adviser is available on the SEBI website under "Info for>Investment Advisers >How to get registered as an Investment Adviser".

Validity of Registration:

Registration certificate remains valid for five years or tills suspended. An investment Adviser has to apply for renewal of its registration certificate to SEBI, at least 3 months before the expiry of the validity of the certificate, if it wishes to continue as a registered investment adviser.

1. Registration Applicant for an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013 should make an application to SEBI in Form A as provided in the Regulations along with all the necessary supporting documents.

2. In General on receipt of Application, the applicant will receive a reply from SEBI within one month. Although the time taken for registration depends on how the applicant fulfils all the registration requirements and provides the complete information in all respects.

3. The applicant is advised to go through the SEBI (Investment Advisers) Regulations, 2013 for checking the eligibility criteria (laid down above) and such other details which may help expedite the registration process.

4. Applicant must mention the following in the covering letter:

• Whether the applicant is providing investment advisory services prior to these Regulations. If yes, provide details
• Details of the investment advice provided prior to such application.
• It is applying for registration of as a new Investment Adviser providing investment advisory services.

5. Along with other information the applicant will submit the following:

• Form A appropriately filled, numbered, duly signed, and stamped.
• Along with application & required fees by way of bank draft in favour of “The Securities and Exchange Board of India”, payable at Mumbai.

6. Applicant shall also make an online application in terms of the guidelines as prescribed by SEBI from time to time.

Post- Registration Compliance

• After getting registered, the IA must comply with the reporting requirements as specified by SEBI from time to time.
• The IA must regularly check the SEBI website for any update/ circulars/ guidelines issued from SEBI from time to time with respect to the IA.
• Investment advisor must intimate to SEBI any material change in the details already furnished to SEBI within a reasonable period of time.
• Obligation which are required to be fulfilled by the investment adviser:
• The advisor shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. She/He shall act honestly, fairly and in the best interests of its clients and in the integrity of the market. She/He shall maintain an arms-length relationship between his activities as an investment adviser and other activities. She/He shall also act with due skill, care and diligence in the best interests of its clients and shall ensure that its advice is offered after thorough analysis  and taking into account available alternatives based on risk profiling and suitability of the client An investment adviser required to comply with general obligations & responsibilities such as general responsibility, disclosures to clients, maintenance of records, etc, as specified under chapter III of IA Regulations as well as the code of conduct as specified under third schedule of IA regulations.

Disclosers to the Clients:

• (A) (IA) investment adviser shall disclose to a prospective client, all material information about itself including its business, disciplinary history, the terms and conditions on which it offers advisory services, associating with other intermediaries and such other information as is necessary to take an informed decision on whether or not to avail its services.
• (B) Investment adviser shall disclose to its client, any consideration by way of remuneration or compensation or in any other form whatsoever, received or receivable by it or any of its associates or subsidiaries for any distribution or execution services in respect of the products or securities for which the investment advice is provided to the client.
• (C) Investment adviser shall, before recommending the services of a stock broker or other intermediary to a client disclose any consideration by way of remuneration or compensation or in any other form whatsoever, if any, received or receivable by the investment adviser, if the client desires to avail the services of such intermediary.
• (D) Investment adviser shall disclose to the client its holding or position, if any, in the financial products or securities which are subject matter of advice.
• (E) Investment adviser shall disclose to the client any actual or potential conflicts of interest arising from any connection to or association with any issuer of products/ securities, including any material information or facts that might compromise its objectivity or independence in the carrying on of investment advisory services.
• (F) Investment adviser shall, while making an investment advice, make adequate disclosure to the client of all material facts relating to the key features of the products or securities, particularly, performance track record.
• (G) Investment adviser shall draw the client’s attention to the warnings, disclaimers in documents, advertising materials relating to an investment product which it is recommending to the client.

Redressal of Client Grievances.  

• Investment adviser shall redress client grievances promptly.
• Investment adviser shall have adequate procedure for expeditious grievance redressal.
• Grievances of client pertaining to financial products, in which investments have been made based on investment advice, shall fall within the purview of the regulator of such financial product.
• Resolve the dispute between the investment adviser and his client may be through arbitration or through Ombudsman authorized or appointed for the purpose by any regulatory authority, as applicable.

Maintenance of Records

• An investment adviser shall maintain the following records,-

1. Know Your Client records of the client;
2. Risk profiling and risk assessment of the client;
3. Suitability assessment of the advice being provided;
4. Copies of agreements with clients, if any;
5. Investment advice provided, whether written or oral;
6. Rationale for arriving at investment advice, duly signed and dated;
7. A register or record containing list of the clients, the date of advice, nature of the advice, the products/securities in which advice was rendered and fee, if any charged for such advice.

• Records shall be maintained either in physical or electronic form and preserved for a minimum period of five years:
• Provided that where records are required to be duly signed and if are maintained in electronic form, such records shall be digitally signed.
• Investment adviser shall conduct yearly audit in respect of compliance with these regulations from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India.