From Oct. 1, individual investment advisers can either distribute investment products or advise on them, but can’t do both. The Securities and Exchange Board of India has amended the Investment Advisers Regulations, setting a tone for a reform that may change business dynamics for these entities.
Any person who advises clients on purchase, sale, investment, or portfolio management in securities for consideration is an ‘investment adviser’ under the SEBI regulations. A person is restricted from providing such services unless she obtains a certificate of registration from the regulator.
The amendment also aims to strengthen the existing regulatory framework by making it mandatory for a non-individual investment advisor to introduce client level segregation between advisory and distribution activities. It also introduces revised net worth criteria for individuals and corporate persons.
Part of the amendment are key changes that introduce segregation of services wherein:
- The same client cannot be offered both kinds of services through a non-individual adviser’s group entities. Thus a holding, subsidiary, joint venture or associate company of an advisor can only provide one type of service to such client.
- Non-individual advisers must maintain an arms-length relationship between their advisory and distribution functions by rendering services through a separate department or division.
and corporatization of Individual advisors to further standardize the investment advisory business and improve its quality.
Rukshad Davar, Partner, and Head of M&A, at Majmudar & Partners, shares his views with media outlet Bloomberg Quint on this move along with other industry experts.
The article discusses several possible outcomes from the amendment and provides expert opinions on the subject from established industry professionals.
Read the article here.