INVESTMENT ADVISORS

REGISTERED INVESTMENT ADVISORS

Investment Advisors is a person who for consideration is engaged in the business providing investment advice to client or other persons or group of persons and includes any person who holds out as an investment adviser by whatever name called.

It means advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment product, whether written, oral or through any other means of communication for the benefits of the client and includes financial planning.

Advice exclusively relating to non-securities market which is regulated by sectoral regulators through registration etc. is outside the scope of these regulations.

Advice given through newspaper, magazines any electronic or broadcasting or tele communications media, which is widely available to the public shall not be considered as investment advice for the purpose of these regulations.

OBJECTIVES OF INTERMEDIARES:

• To protect client assets from insolvency of the intermediaries.
• To guard clients against defaults as well as sudden disruption in the market.
• To ensure that the intermediaries are fair and diligent in dealings with their clients.
• To reduce conflict of interest.
• To ensure regulation of the segment.

RESPONSIBILITIES OF AN INVESTMENT ADVISORS

1. Act in a fiduciary capacity towards its client and shall disclose all conflict of interest as and when arise.
2. Shall not receive any consideration by way of remuneration or compensation or in any other form, from any person other than the client being advised.
3. Shall maintain an arms-length relationship between its activities as an investment adviser and other activities.
4. Shall follow KYC procedure as specified by SEBI from time to time.
5. Shall not act on its own account, knowingly to sell securities or investment products to or purchase securities or investment product from a client.
6. Shall not enter into transaction on its own account which is contrary to its advice given to clients for a period of 15 days from the day of such advice.
7. Change in control of investment advisor prior approval from SEBI shall be taken.
8. Shall furnish to SEBI information and reports as specified by SEBI.

REDRESSAL OF CLIENT GRIEVANCES

1. An investment advisor shall redress client grievances promptly but not later than 21 days calendar days from the date of receipt of grievance.
2. An investment advisor shall have adequate procedure for expeditious grievance redressal.
3. Any dispute between the Investment advisor and client shall submitted to a DRM that includes mediation and or conciliation and or arbitration in according with specified by SEBI or though OMBUDSMAN authorized or appointed for purpose by any regulatory authority.

KEY PARAMETERS

Exemption from registration under Investment Advisor Regulations

1. A person who gives general comments in good faith in regard to trends in the financial or securities market or the economic situation.
2. Entities which are providing advice to their primary activity and are regulated by respective regulator/ body/ Institute:-
3. Insurance agent or insurance broker.
4. Pension Advisor.
5. Distributor of Mutual Fund.
6. Advocate, solicitor, or law firm.
7. Any other member of ICSI, ICAI, ICMAI, etc.
8. Any stock broker, portfolio manager or merchant banker registered under respective SEBI regulation.
9. Any Fund manager of a Mutual Fund, AIFs or any other intermediary by whatever name called.
10. Advice exclusively to clients based out of India (not being NRI or PIO).

ADMINISTRATION AND SUPERVISION OF INVESTMENT ADVISORS

SEBI Investment Advisors regulations that provide that SEBI may appoint a SRO for purpose of administration and supervision of investment advisors.

SEBI vide circular dated June 18,2021 has provided the framework for administration and supervision of investment advisors under Investment Regulations and has recognized (BASL) a wholly owned subsidiary of BSE ltd. As IAASB.

The details of the number of IAs and RAs at the end of the FY 2020-21 to FY 2023-24 are mentioned below:

* IAs who are registered with SEBI and have also obtained membership of Investment Advisor Administration and Supervisory Body (IAASB).

MAJOR DEVELOPMENTS/ AMENDMENTS TO BE CONSIDERED FOR INVESTMENT ADVISOR

SEBI (Investment advisors) Amendment Regulation, 2020 w.e.f September 30, 2020

It includes strengthening of educational and experience criteria, Net Woth requirements, Fees charged, compliance with respect to audit requirements etc.

KEY REGULATORS CHANGE

1. Segregation of advisory and distribution activities should done at client level to avoid conflicts of interest.
2. Allowed to provides implementation services through direct schemes / products in securities market.
3. Mandatory agreement to be entered between investment advisors and client ensuring greater transparency.
4. Eligibility Criteria—

Individual investment advisor or a principal officer of a non-individual investment advisors to have enhanced professional or post graduate qualification in relevant subjects and relevant experience of 5 years.

Individual Investor advisors whose number of clients exceed 150 in total shall apply for registration with SEBI as non- individual.

LIABILITY FOR ACTION IN CASE DEFUALT

An Investment advisor who–

1. Contravenes any provision of the act of any regulation or circular.
2. Fails to furnish any information relating to its activity as an Investment advisor.
3. Furnish to board information which is false or mis leading.
4. Doesn’t submit periodic returns or reports as requirements by SEBI.
5. Doesn’t co-operative in any enquiry, inspection or investigation.
6. Fails to resolve the complaints of investor.
7. Fails to give a satisfactory reply to the SEBI on above enquiry, inspection or investigation.

 CONCLUSIONS:

Investment Advisors play important role in the financial ecosystem by guiding individuals and businesses in making informed and strategic investment decisions. Registered under SEBI and governed by the SEBI (Investment Advisers) Regulations, 2013, they ensure transparency, professionalism, and investor protection.

With increasing financial complexity and a wide range of investment options, the need for qualified and ethical advisors has grown significantly. Investment Advisors not only help in wealth creation but also assist in risk management, financial planning, and achieving long-term financial goals.

Moreover, strict eligibility criteria, disclosure requirements, and fiduciary responsibilities ensure that advisors act in the best interest of their clients, thereby building trust and credibility in the market.

In conclusion, Investment Advisors serve as a bridge between investors and financial markets, promoting disciplined investing and contributing to the overall.