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This covers written, oral orany other means of communication for the benefit of the client and shall include financial planning. An individual registered as an investment advisor, partner or representative of an investment advisor registered under these regulations offering investment advice should at all times possess a professional qualification or post-graduate degree/ diploma in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a foreign or government recognised university or an institution. Alternatively, a graduate in any discipline with an experience of at least five years relating to advice in financial products/securities/fund/asset or portfolio management would also qualify.
The much-awaited regulations from the Securities and Exchange Board of India (Sebi) specifying various requirements for a person or corporate body to act as investment advisor are finally out. According to the Gazette of India notification released on Monday, the Sebi Investment Advisors 2013 brings into play requirements related to qualification, certification, capital adequacy, period of validity of certificate and other general obligations. The “investment advice” includes clauses relating to investing, purchasing, selling or otherwise dealing in securities or investment products.
Additionally, investment advisors are required to have a certification on financial planning/fund/asset or portfolio management or investment advisory services either from NISM or from any other organisation or institution, including Financial Planning Standards Board India or any recognised stock exchange in India, provided such certification is accredited by National Institute of Securities Markets (NISM). Existing investment advisors seeking registration under these regulations should ensure their partners and representatives obtain such certification within two years from the date of commencement of these regulations and the same is renewed before the expiry.
The Sebi regulation also talks of a minimum net worth requirement of `25 lakh for investment advisors that are corporate bodies, and those who are individuals or partnership firms should have net tangible assets worth not less than `1 lakh. The certificate of registration granted under the regulations shall be valid for five years from the date of its issuance. Investment advisors as part of their responsibility would have to do risk profiling of customers, determine suitability, maintain records and disclose specific details to clients on a regular basis. They need to ensure the risk profiling of the investor is based on his age, current assets and income, investment objectives and time horizon. The process for assessing the risk that a client is willing to and able to take would include tools like questionnaires that are clear, simple, detailed and forward leading.
It will be mandatory for investment advisors to maintain all records like know your customer (KYC), risk profiling, suitability sheets, agreement copies, investment advice, whether oral or written, data on fees and time of providing advice for at least 5 years either in electronic or physical form. Experts believe though they haven’t gone through the details, the broad guidelines seem to be more or less in line with the draft guidelines the regulator had come out last year.
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