Investment Advisors Registration with SBI

Who Are Investment Advisors?

As per the Investment Advisor Act 1940, an investment advisor can be a person or a group who in exchange for a fee give investment recommendations to the client (investors). They also conduct securities analysis either by written publications or through direct management of client’s assets. The investment advisors have a discretionary authority to act on behalf of their clients in the matters of investment and thus are allowed to take any action without obtaining any formal permission for the same.

The basic job of an investment consultant is to advise its clients (investors) in investment, buying, selling, or in any other deal related to investment products and securities. They also advise their clients on investment portfolios containing various investment products and securities (refer to Section 2(h) of Securities Contract Regulation Act 1956 to know what investment products come under the name of securities). The consultation given by these entities could be in any form (written, oral, or any other means).

Responsibilities of Investment Consultants Registered with SEBI

• They should act under their fiduciary capacity and within the interest of their clients.
• They bear the responsibility of not divulging any tip or information related to the client’s investment.
• They should maintain the Code of Conduct as specified.
• They should conduct a risk assessment and risk profiling of the investor.
• It is their duty to make sure that investments should be suitable to the risk profile of the client.
• Written records of investments should be maintained for a period of 5 years.
• Proper systems and procedures should be in place to redress the grievances of clients.

It is unlawful for any investment advisor to use any device or scheme to defraud any client or prospective client.

Features of Investment Advisors under SEBI

• They are regulated directly through the norms of the Securities Exchange Board of India (SEBI).
• The registered investment advisors need to disclose any possible conflicts of interest to their clients to maintain transparency.
• They charge the client as per their percentage of their assets under management (AUM).
• They need to obtain registration for their activities and must obtain license series 65 within the USA. In India, an investment adviser has got to get registered under SEBI IA Regulations, 2013.
• To extend transparency in their service, a Separate Investment Advisory Agreement Service through a circular that is provided by the Commission.

Investment Advisory as Per the Act

Under the Investment Advisory Act, the advisory which is widely available through mass media networks like news channels or newspapers and magazines would not be considered investment advisory. Investment advisories are specific to the client as per their risk profile which is confidential between the investment advisor and the investor. Whatever communication-related to buying, selling, or dealing in securities happens between the two is covered under the investment advisory. 

Who can Apply for Investment Advisor License under SEBI?

Any person willing to conduct the business of giving consultations to investors related to their investments and holdings can apply to get the investment advisor licence from SEBI. However, SEBI has notified a few sections which cannot apply for the license of Investment advisors as per the norms. The regulations of SEBI exempts persons such as insurance agents, insurance brokers, pension advisors, stockbrokers, mutual fund distributors, sub-brokers, fund managers, portfolio managers, solicitors, advocates, firms, from applying for a license under its REGULATION 4 of IA ACT. 

Eligibility Criteria to Get FPI Registration from SEBI

• As per the rules any of the following can apply to be an Investment Advisor: 

1. Individual
2. Partnership firms
3. Corporate body (including LLPs)

• For individuals applying for the license, they must have the following qualifications:

1. A graduate in any discipline with at least 5 years experience in activities related to giving consultations on financial products/securities/fund/asset/portfolio management.
2. A professional qualification related to finance or postgraduate degree or PG diploma in finance, business management, accountancy, commerce, capital market, economics, insurance, banking, from an institution recognized by the central government or any of the state governments or any recognized foreign university/institution/association.
3. Any other requirement as mentioned in Regulation 7 of the IA Act.

• For the applicant who is a corporate body, all the representatives of the applicant company who will be rendering Investment advice must be appropriate and qualified as per Regulation 7. This also goes for any LLP or firm applying for registration. 
• For corporates, a minimum net worth of Rs. 25 lakhs is required and in the case of a partnership firm or an individual, the minimum net worth requirement is Rs. 1 lakh. 
• All the promoters of the applicant company or the applicant himself in case of an individual must be fit and proper as per the eligibility criteria of the regulations. 

Procedure for Investment Advisor License from SEBI

• The applicant seeking the Investment advisor license must make an application in FORM A with the necessary documents with the non-refundable fee of Rs. 5000 in the case of individuals and Rs. 25000 in the case of Corporate bodies including LLPs. 
• After receiving the application and documents, the board will verify all the documents and the relevant details as per its norms. It may ask for additional documents or even ask the applicant to appear before it for verification purposes. 
• Once satisfied with the application, the board will send an intimation to the applicant to pay the requisite fee for the licensed post which the registration certificate will be granted. The fee to be paid for a Corporate applicant is Rs. 5,00,000 and for an individual applicant is Rs. 10,000. 

After payment of the requisite fee, the board will grant the certificate of registration on Form B specified in the regulations. The certificate remains valid unless it is suspended or cancelled by the board.