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).
It is unlawful for any investment advisor to use any device or scheme to defraud any client or prospective client.
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.
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.
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.
The following documents are required for Depository Participant SEBI Registration:
As per the rules any of the following can apply to be an Investment Advisor:
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. 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.
For corporates including LLPs, a minimum net worth of Rs. 25 lakhs is required, and in the case of a partnership firm or and for the individual, the minimum net worth requirement is Rs. 1 lakh.
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