On February 17, 2020, Securities and Exchange Board of India (SEBI), the regulator for the securities market in India, has decided to tighten the eligibility rules for investment advisors with the intention of protecting the interests of investors.
It has also decided to set a upper limit on their fees & proposed a fee of 2.25% of assets under management (AUM) / an amount of ₹75,000 per annum. The fee can be charged for up to 2 quarters at a time and cannot be fully charged upfront.
Key Points:
i.SEBI has raised the eligibility criteria for registration as investment advisor. This includes enhanced net worth and qualification requirements. The old provisions will remain for the existing personal advisers.
Also, an agreement will be signed between the adviser and the client to bring transparency. It will include all the terms and conditions.
ii.SEBI has barred investment advisers from simultaneously selling financial products and advisory services & also banned the use of words such as independent financial advisors or wealth advisors by those involved in the distribution of securities. However, if such people are also registered as investment advisors, they will be able to use these words.
iii.Companies will need to differentiate advisory and delivery activities at the client level.
iv.SEBI has also approved rules for regulatory sandboxes(RS), which will enable live-testing of new financial products / services in a controlled ecosystem. Exchanges and market infrastructure institutes have already implemented their own sandboxes.
About Securities and Exchange Board of India (SEBI):
Formed- April 12, 1992
Headquarters– Mumbai, Maharashtra
Chairman– Ajay Tyagi
