SEBI issues Consultation Paper on Amendments to the SEBI (Investment Advisers) Regulations, 2013

Securities and Exchange Board of India (SEBI) has issued Consultation Paper on Amendments to the SEBI (Investment Advisers) Regulations, 2013. The proposed amendment to the SEBI (Investment Advisers) Regulations, 2013 are as under-

                          i.          There should be clear segregation between the two activities of the entity i.e. providing investment advice and distribution of the investment products/ execution of investment transactions.

                        ii.          Individuals  who  are  willing  to  get  registered  as  investment  advisers  shall not provide  any distribution  services in  financial  products, either directly or   through   any   of   their   immediate   relatives.   Similarly,   individuals providing  distribution  services  shall  not  provide  advice  for  investing  in financial  product  either  directly  or  through  their  immediate  relatives. “Immediate relative” means a spouse of a person, and includes parent, brother, sister or child of such person or of the spouse as defined under SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.

                      iii.          Banks, NBFCs, Body Corporates, LLPs and firms  who are willing to  get registered  as  investment  advisers,  shall  not  provide  any  distribution services  in  financial  products,  either  directly  or  through  their  holding company  or  associate  company  or  subsidiary  company.  Similarly, banks, NBFCs, body corporates, LLPs and firms providing distribution services shall not provide investment advice in financial products either directly or through their holding company or Associates Company or subsidiary company. “Associate company” of an entity means a body corporate in which  the  entity or  its  director  or  partner  holds,  either  individually    or  collectively,    more    than    fifteen    percent   of    its   paid-up  equity share capital or partnership interest, as the case may be.

                       iv.          Existing  registered  investment  advisers  who  are  offering  distribution services  through  immediate  relatives  or  through  separately  identifiable division   or   department   or   through   holding   /   subsidiary   /associate company   shall   choose   among   providing   investment advice   or   the distribution  services  before  March  31,  2019.  Similarly,  distributors  who are  offering  advisory  services  through  aforesaid  modes  shall  also  choose between distribution services and advisory services. From April 01, 2019, any person, including their immediate relatives or holding/subsidiary/associate entity, shall offer either investment advice or distribution services.

                         v.          Mutual  Fund  Distributors  (MFDs),  while  distributing  their  mutual  fund products  can  explain  the  features  of  products  to  client,  and  shall  ensure the principle of ‘appropriateness’ of  products  to  the  client.  As  per  the extant  SEBI  circulars,  appropriateness  is  defined as  selling  only  that product  categorization  that  is  identified  as  best  suited  for  the  client.  As part of disclosures to clients, MFDs shall disclose the list of mutual funds they  are  affiliated  with  and  that  the  information  provided  is  restricted  to the mutual fund products being distributed by them. However, the client may also consider other alternate products, which are not being offered by them before making investment decision.

In light of the above, public comments are invited on the proposals contained in the consultation paper. Comments/suggestions may be provided in the format given below:

Name of entity / person / intermediary/ Organization

Sr. No.

Pertains to Point No

Suggestions

Rationale

 

The comments may either be forwarded by email to sebiria@sebi.gov.in or may be sent by post to the following address latest by January 23, 2018 to Deputy General Manager Investment Management Department, Division of Funds-I, Securities and Exchange Board of India (SEBI) Bhavan, Plot No. C4-A, "G" Block, Bandra  Kurla Complex, Bandra (East), Mumbai -400 051.

 

URL: https://www.sebi.gov.in/reports/reports/jan-2018/consultation-paper-on-amendments-to-the-sebi-investment-advisers-regulations-2013_37247.html