Investment Advisors:-
An investment advisor, as per the Investment Advisors Act of 1940, means any person or group who in return for fees, makes investment recommendations or conducts securities analysis, whether through direct management of client assets or via written publications.
They are experiencing a level of discretionary authority, which allows them to act on the behalf of their clients without obtaining any formal permission prior to the execution of an action.
They basically provide advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities (See Section 2(h) of Securities Contracts Regulation Act 1956 to understand what all instruments are covered under the word Securities) or investment products.
This advice can be given in written, oral or through any other means of communication.
Obligations and Responsibilities of SEBI Registered Investment Advisors:-
1- They should act in a fiduciary capacity and in the interest of its clients
2- They bear the responsibility of not divulging any confidential information
3- They should abide by Code of Conduct as specified
4- They should conduct risks profiling and risk assessment of the investor
5- It is their duty to ensure that investments should be suitable and appropriate to the risk profile of their client
6- Written records should be maintained for a period of 5 years
7- Proper system and procedure should be maintained for redressing grievances of clients.
8- It is unlawful for any investment Adviser to employ any device or scheme to defraud any client or prospective client.
An Investment advisor can be in any form such as:
1- Individual
2- Body corporate Including (LLPs)
3- Partnership firms:- But before Establishing as an Investment advisor, one has to get itself registered with SEBI under SEBI (Investment Advisers) Regulations, 2013 as RIA.
Once registered, they have the obligation to act as a fiduciary i.e prescribe only commission free product.
Procedure for getting SEBI Registered Investment Advisor are explained below:-
Applicant seeking to get registered as Investment Advisor shall file its application in Form A along with the required documents provided in the regulations with a non-refundable fee:-
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S. No.
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Particular
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Fees
|
|
1.
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For Individual and Firms
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5000
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2.
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For Body Corporate including Limited Liability Partnerships
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25000
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On receipt of application, the Board may require the applicant to furnish further information or clarification or even may ask them to appear in person before the board regarding matters relevant to investment advisory services.
The Total time in which, applicant get registered totally depends on how they fulfill all the requirements and provides the complete information in all respects.
Before granting certificate, the Board will consider the following points:-
- Whether the applicant is an individual or a body corporate or a firm;
- In case, if applicant is an individual, he must possess the following qualification;
A professional qualification or post-graduate degree or postgraduate diploma in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or an institution recognized by the central government or any state government or a recognized foreign university or institution or association; Or
A graduate in any discipline with an experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.
Or other requirements as specified in regulation 7:-
- Whereas in case the applicant is a body corporate, all the representatives on the behalf of the applicant who provides investment advice are appropriately qualified and certified as specified in regulation 7; Similarly, in case of firm or LLP
- whether the applicant fulfills the capital adequacy requirements as specified in regulations as described below;
In case of Body Corporate, shall have net worth not less than twenty-five lakh whereas in case of individual or partnership firm net worth should not less than INR one lakh.
The applicant, its representatives, and partners, if any, are fit and proper persons determined on the basis of the criteria specified in Schedule 11,
Once, the board is satisfied that the applicant complies with all the requirements as specified in regulations, shall send the intimation to the applicant and on receipt of fees as prescribed below:-
The Board shall grant the certificate of registration in Form B as specified in regulations. It remains valid unless it has been suspended or cancelled.
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S. No.
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Particulars
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Fees
|
|
1.
|
In case of Individuals and Firms
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10,000
|
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2.
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In case of Body Corporate including Limited Liability
Partnerships
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5,00,000
|
Post Registration Compliances:-
Must comply with the reporting requirements as specified by SEBI from time to time.
They must have to regularly visit the SEBI website for any updation / circulars / guidelines issued time to time with respect to their market.
They must intimate to SEBI any material change in the details which has been already furnished to SEBI within a reasonable period of time.
This article has been written by CS Tanuj Chandra Saxenaa (ACS, M.COM, MBA (FINANCE), CFI (FMVA) (Pursuing) SAP FICO Certified. He is a Practicing Company Secretary and Trademark Agent in Tanuj Saxena & Associates in Lucknow, Uttar Pradesh.