SEBI has released today the SEBI (Investment Advisers) Regulations, 2013, to come into effect from the ninetieth day of their publication. While a more detailed post will follow, here are some first impressions.
SEBI has cast a very wide net, almost amounting to an overkill.
Every Investment Adviser, as defined, will be required to register with SEBI to carry on business of providing investment advice. What constitutes investment advice has been widely defined to mean, “advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning”.
There are several exceptions to the term Investment Advisers. Insurance Agents/brokers who offer investment advice solely in insurance products and registered with IRDA are not covered. Similar exemption for Pension Advisers is granted. Mutual Fund distributors are also given exemption subject to certain conditions. Professionals CAs, CSs, ICWAs and Advocates providing investment advice incidental to their professional services are also not covered.
Still, even considering these exemptions, the number of investment advisers is likely to be huge.
Each of such advisers will have to apply and obtain registration. Existing Investment Advisers have 6 months from the Regulation coming into effect to apply and if they do not, they will have to discontinue their activity. New Investment Advisers will have to apply for and obtain registration as a pre-condition of carrying on such activity.
There is no minimum threshold limit of advisory fees or similar for applying for registration. Every such Investment Adviser will have to apply. SEBI thus has taken upon itself this massive job of scrutinising every such application and granting (or rejecting) registration. And this is only the starting. After granting registration, it will have to monitor each of such Advisers as to whether they follow the Regulations/Code of Conduct (again very widely framed) or not. There will expectedly be a large number of allegations of non-compliances – some arising out of SEBI’s own inspections, investigation and information and many arising out of investor complaints. SEBI will have to process each of these and take action. This would perhaps have scared any regulator already burdened otherwise.
Each such Investment Adviser will need to have prescribed qualifications/training and also the minimum net worth.
One-time application fees and recurring registration fees will also have to be paid.
A follow up article will discuss some more aspects of these Regulations.