SEBI notifies amendment to
SEBI (Investment Advisors) Regulations, 2013 vide its amendment dated 16th
December, 2024. Salient features of the amendment are as follows
1) Reg 2(1)(ga) pertaining to CPE (continuing
professional education) has been deleted
2) In the definition of “investment advice” the words “or
investment products” has been deleted;
3) Further a proviso has been added that “trading calls”
shall not be considered as investment advice for the purpose of these regulations;
4) In Reg 2(1)(m) the concept of “part time investment
advisor” has been introduced;
5) A new definition has been added as clause (pb) in Reg
2(1) as follows:
“(pb) “other business activity or
employment” means such business activity or employment which is not related to
securities and: a. it does not involve handling or managing of money or funds
of client or person; or b. it is not related to providing advice or
recommendation to any client or person in respect of any products or assets for
investment purposes;
6) A new definition has been added as clause (qa) in Reg
2(1) as follows:
“(qa) “part-time investment adviser”
means an individual or a firm, who for consideration, is engaged in the
business of providing investment advice and is also engaged in any other
business activity or employment;”
7) Clause (s) which pertains to definition of “principal
officer” of a non individual investment advisor has been completely replaced as
under:
“ “principal officer” in
case of non-individual investment adviser engaged:
(i)
solely in providing investment advisory
services, shall mean the managing director or designated director or managing
partner or executive chairman of the board or equivalent management body who is
responsible for the overall function of the business and operations of
non-individual investment adviser;
(ii)
in the activities other than investment
advisory services, through separate departments/divisions, may be the person at
the management level who is a business head or unit head, responsible for the
overall function of the business and operations related to investment advisory
services:
Provided
that in case of non-individual investment adviser being a partnership firm, one
of the partners shall be designated as its principal officer:
Provided
further that where no partner of firm registered as an investment adviser has
minimum qualification and certification requirements provided in these
regulations, it shall apply for registration as an investment adviser in the
form of a limited liability partnership or a body corporate within such time as
may be specified by the Board.
Explanation.
— The provisions of sub clause (i) shall also be applicable to the principal
officer of a non-individual entity registered both as an investment adviser and
a research analyst but engaged in no other business activity.”
8) Two more
clauses have been added in the definition section which are as follows:
“(t) “research analyst” means any person
registered under Securities and Exchange Board of India (Research Analysts)
Regulations, 2014;
(u) “trading calls” shall have the same
meaning as assigned to it under clause (zc) of sub-regulation (1) of regulation
(2) of the Securities and Exchange Board of India (Research Analysts)
Regulations, 2014.”
9)
Regulation
6 which is pertaining to “consideration of application and eligibility criteria”
– the clause (e ) has been amended to substitute “networth” with “deposit” So
now the clause (e ) will read as under:
“whether the applicant fulfils the deposit
requirement as stipulated in Reg 8”
10)
In
Reg 7, graduate degree is recognised as a qualification requirement for
becoming an investment advisor. Presently only professional qualification or post
graduate degree or post graduate diploma was recognised.
11)
Apart
from the usual degrees in subjects such as finance, accountancy, business
management, commerce, economics, actuarial science etc. a residuary clause “any
other financial service” has been added in Reg 7.
12)
Reg
7(1)(b) which pertained to experience of at least five years in activities
relating to advice in financial products or securities or fund or asset or portfolio
management – has been deleted completely.
13)
Reg
7(1)(c ) has been completed revamped as under:
“(c) Persons associated with investment
advice shall, at all times, have a minimum qualification of graduate degree in
any discipline from a university or institution recognized by the Central
Government or any State Government or a recognized foreign university or
institution:”
The experience part has been omitted completely and also the requirement
for individual investment advisors to comply with the qualification and
experience requirements within such time as may be specified by the Board.
14) Reg 7(2) has been superceded as follows:
“(2) An individual investment adviser or
principal officer of a non-individual investment adviser, registered under
these regulations, persons associated with investment advice, and in case of
investment adviser being a partnership firm, the partners thereof who are
engaged in providing investment advice, shall have at all times relevant NISM
certification as specified by the Board from time to time:
Provided that a fresh relevant NISM
certification as specified by the Board from time to time shall be obtained
before expiry of the validity of the existing certification to ensure
continuity in compliance with certification requirements.”
So relevant NISM certification replaces
certification on financial planning or fund or asset or portfolio management or
investment advisory services. Also certification from any other organisation or
institution including Financial Planning standards board of India or any recognised
stock exchange provided certification which is accredited by NISM is OUT.
15) Reg 8 which pertained to “networth” requirements has
been revamped as under:
“Deposit. 8. (1) An investment adviser
shall maintain a deposit of such sum, as specified by the Board from time to
time.
(2) The deposit shall be maintained with
a scheduled bank marked as lien in favor of a body or body corporate recognized
by the Board for the purpose of administration and supervision of investment
advisers in accordance with regulation 14 of these regulations:
Provided that such deposit shall be
available for utilization in case the investment adviser fails to pay dues
emanating out of arbitration and conciliation proceedings, if any, under the
Online Dispute Resolution Mechanism or such other mechanism as may be specified
by the Board.”
16) Reg 9 which
pertains to grant of certificate has included a Form C which is a registration
for a part time investment advisor.
17) An additional
proviso has been in Reg 9 as under:
“Provided that an individual or
partnership firm registered as a research analyst may be granted certificate of
registration as an investment adviser, subject to such terms and conditions as
the Board may deem fit and appropriate.”
18) In Reg 13 it has
been provided that “part time investment advisor” shall use the term “part time
investment advisor” in all their correspondences with clients.
19) Reg 13(1)(e ) which pertained to no. of clients of an
individual investment advisor (presently 150) has been expanded to 300 or fee
collected during the financial year exceeds Rs.3 crores, whichever is earlier.
Further a transition time of 3 months is given for going from individual
investment advisor to non individual advisor. The revamped clause (e ) reads as
under:
“(e)
individuals registered as investment advisers whose number of clients exceed
three hundred at any point of time or the fee collected during the financial
year exceeds three crore rupees, whichever is earlier shall –
(i)
apply for grant of in-principle
registration as non-individual investment adviser;
(ii)
the in-principle registration shall be
valid for a period of three months to assist in the transition from
registration as individual investment adviser to non-individual investment
adviser;
(iii)
on completion of the transition period or
upon grant of certificate of registration as nonindividual investment adviser,
whichever is earlier, the investment adviser shall surrender his registration
as individual investment adviser.”
20)
New
clause (f) has been added in Reg 13 as follows:
“(f) the number of clients of a part-time
investment adviser shall not exceed seventy-five in total at any point of
time.”
21)
Reg
15 which pertains to general responsibility of IAs has a new clause (14) added
as follows:
“(14) An investment adviser who uses
Artificial Intelligence tools, irrespective of the scale and scenario of
adoption of such tools, for servicing its clients shall be solely responsible
for the security, confidentiality, integrity of the client data, use of any
other information or data to arrive at investment advice, investment advice
based on output of Artificial Intelligence tools and compliance with any law
for the time being in force.”
22)
Reg
18 which pertains to disclosures to clients, see two new clauses added as
follows:
“(8) An investment adviser who provides
advisory services in respect of products or services which are outside the
purview of the Board, shall disclose to the client that such products or
services and his advisory services in respect of such products or services are
outside the regulatory purview of the Board and no recourse from the Board
shall be available to such clients for any grievance arising therefrom.
(9) An investment adviser shall disclose
to the client the extent of use of Artificial Intelligence tools in providing
investment advice.”
23)
Reg
19 which pertains to maintenance of records, clause (1)(g) has been amended to
provide for list of clients, along with PAN and “details of products/
services” has to be maintained. Along with fee/ consideration
if any charged/ received for such service has been added.
24)
New
clause has been added in Reg 19, which is as follows:
“(h) Records of communication including
emails, call recordings etc. with all clients including prospective clients, as
may be specified.
25)
Reg
19(3) has been amended to provide that the audit can be conducted by a member
of the ICMA also besides ICAI & ICSI.
26)
A
new regulation 19A has been added as follows:
19A.
An investment adviser shall maintain a functional website containing such
details as may be specified by the Board.”
27) Reg
20 which pertains to appointment of compliance officer has been replaced as
follows:
“20. (1) A
non-individual investment adviser shall appoint either:
(i)
a compliance officer; or
(ii)
an independent professional who is a
member of Institute of Chartered Accountants of India or Institute of Company
Secretaries of India or Institute of Cost Accountants of India or member of any
other professional body as may be specified by the Board,
provided
such a professional holds a relevant certification from NISM, as may be
specified by the Board;
who
shall be responsible for monitoring the compliance by the investment adviser in
respect of the requirements of the Act, regulations, notifications, guidelines,
instructions issued by the Board.
(2)
Where independent professional referred in sub-regulation (1) of this
regulation is appointed for monitoring compliance, the principal officer shall
submit an undertaking to the Board or the body or body corporate recognized
under regulation 14 of these regulations to the effect that the principal
officer shall be responsible for monitoring the compliance in respect of the
requirements of the Act, regulations, notifications, guidelines, instructions
issued by the Board.”
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