For Investment Advisers and Research Analysts
- SEBI has issued an consultation paper on Review of Regulatory Framework for Investment Advisers and Research Analysts and proposed a regulatory changes in Framework for IAs and RAs.
- Summary of proposed changes are detailed below :-
- Existing minimum qualification requirements for registration as IA or RA from a post-graduation to a graduate degree.
- IAs and RAs shall be required to obtain the base certifications (NISM-Series-XA and XB for IAs, and NISM-Series-XV for RAs) only initially at the time of registration as IA/RA .in future, they may have to secure additional certification only for the changes that have happened in the last three years.
- There shall be no requirement of experience for registration as IAs and RAs. Further it is proposed to remove the net worth requirement as their services are fee-based and they do not manage clients’ funds and securities. However, they will be expected to maintain a deposit lien market to a stock exchange as IAASB/RAASB.
- The deposit amount will be based on the number of clients handled by RIAs and RAs—
- Up to 150 clients: ₹ 1 lakh
- 150 to 300 clients: ₹ 2 lakh
- 300 to 1,000 clients: ₹ 5 lakhs
- 1,000 and above clients: ₹ 10 lakhs.
- Individuals or partner-ship firms may be allowed to seek registration as both IA and RA provided they shall comply with the rules/regulations/reporting requirements under each of these regulations separately. Further they are also required to ensure that, there investment advisory services and research services are clearly segregated from each other.
- Further it is proposed to allow Part time IA/RA.
- A non-individual IA/RA which is engaged in multiple line of businesses through separate departments/divisions may appoint the business head of its investment advisory activities as its Principal Officer. In case of partnership firm, one of the partners must be designated as Principal Officer and shall be required to comply with qualification and certification requirements.
- RA/ IA may appoint an Independent professional i.e.CA or CS or CMA (with NISM certification) as its compliance officer.
- RIAs and RAs presently charge fees under two modes—assets under advice (AUA) mode (limit of 2.5% of AUA per annum per family of client) and fixed fee mode (limit of Rs 1,25,000 per annum per family of client). If they wish to change the mode, the same can be effected only after 12 months since the last change of mode. It is now proposed to do away with this method and give flexibility to RIAs to charge fees without a minimum period restriction.
- An individual IA is required to apply for registration as non-individual IA on or before reaching 300 clients (Initially it was 150) or fee collection of INR 3 crore during the financial year whichever is earlier.
- It is proposed to exempt proxy advisors (PA) from the ambit of the Research Analyst Administration and Supervisory Body (RAASB) as the nature of services of proxy advisor is different from RA. A proxy advisor will now be under the supervision of SEBI directly.
- It is proposed to have a clear segregation at client level research services and distribution services and further it is proposed to have regulatory provisions similar to IAs in this regard.
- RAs will be required to disclose to the client, the terms and conditions of the research services offered such as consideration, conflict of interest, risk factors, mechanism for grievance redressal and dispute resolution etc., including their rights and obligations.
- RAs shall follow the KYC procedure for their fee paying clients and maintain KYC records for their clients as specified by SEBI from time to time.
Comments are invited on the proposals mentioned in the consultation paper. The comments/ suggestions should be submitted to SEBI latest by August 26, 2024, through the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes
