After the payment of required application and registration fees, all investment advisors would need to register with SEBI, Press Trust of India reported.
The market regulator eventually wants them to be regulated through a self regulatory organization (SRO) model.
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A senior regulatory official was quoted as saying that while the proposals have been approved by SEBI’s board, they could be soon notified by the market regulator.
Under the SEBI’s proposed norms, advisors would be under strict vigil for any front-running, a phrase used in market parlance for trading in stocks based on prior information about trades to be conducted by a fund manager.
Also, investment advisors may charge fees subject to the ceiling specified by SEBI.
Additionally, the advisors would have to disclose to the investor its holding or position, if any, in the financial product which is subject matter of recommendation.
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By GlobalDataThey would also have to abide by a code of conduct and conduct risks profiling and risk assessment of the investor, apart from being required to maintain written records relating to investment advisory services for a period of five years and conduct yearly audit in respect of compliance with regulation.
Aspiring investment advisors would need to have an experience of at least five years in activities relating to advice in financial products or fund or asset or portfolio management, besides other educations qualifications.
The investment advisors who are body corporate shall have a net-worth of not less than Rs25 lakh, while individuals or partnership firms shall have net tangible assets of not less than Rs5 lakh.
SEBI registration would be required for those banks that have been permitted by RBI to undertake investment advisory services through a subsidiary or a separate division.
Further, a person giving general comments in good faith in regard to trends in the financial or securities market or the economic situation and where such comments do not specify any particular securities or investment product, will be exempted from the purview of SEBI regulation.
