The Securities and Exchange Board of India (SEBI) on January 08, 2025, issued Guidelines for Investment Advisers.
The SEBI after considering the inputs from public consultation, has reviewed the framework for the regulation of Investment Advisers (IA) and has notified the SEBI (Investment Advisers) (Second Amendment) Regulations, 2024, on December 16, 2024. These amendments have come into force on the date of notification i.e. on December 16, 2024.
The following guidelines specified under the amended SEBI (Investment Advisers) Regulations, 2013:
• Deposit requirement:
As per Regulation 8 of the IA Regulations, an investment adviser shall maintain a deposit of such sum, as specified by SEBI from time to time. The deposit requirements shall be based on the maximum number of clients of IA on any day of the previous financial year, as under:
o Up to 150 clients - ₹ 1 lakh
o 151 to 300 clients - ₹ 2 lakh
o 301 to 1,000 clients - ₹ 5 lakhs
o 1,001 and above clients- ₹ 10 lakhs
• Registration both as Investment Adviser and Research analyst:
In terms of the proviso to Regulation 9 of the IA Regulations, an individual or partnership firm registered as a research analyst may be granted certificate of registration as an investment adviser, subject to such terms and conditions as the SEBI may deem fit and appropriate. Accordingly, these terms and conditions are as under:
o A research analyst, who is an Individual or partner-ship firm, registered under the SEBI (Research Analysts) Regulations, 2014 (RA Regulations), may be considered eligible for grant of certificate of registration as IA under the IA Regulations provided that it shall comply with the rules/regulations/reporting requirements under each of these regulations viz. IA Regulations and RA Regulations separately.
o Such IA/RA shall provide an undertaking stating that it shall maintain arms-length relationship between its activity as IA and RA and shall ensure that its investment advisory services and research services are clearly segregated from each other.
• Appointment of an independent professional as Compliance Officer:
In terms of Regulation 20 of the IA Regulations, a non-individual investment adviser may appoint an independent professional who is a member of ICAI or ICSI or ICMAI or member of any other professional body as may be specified by the SEBI, provided such a professional holds a relevant certification from NISM, as may be specified by the SEBI. In such cases, the principal officer shall submit an undertaking to IAASB/SEBI to the effect that principal officer shall be responsible for monitoring the compliance in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by SEBI/IAASB.
• Fees and flexibility in change of modes of charging fee to clients
Regulation 15A of the IA Regulations provide that IAs shall be entitled to charge fees from a client in the manner as specified by SEBI. In terms of the fee related provisions, IAs can charge fees under two modes, namely, (i) Assets under Advice (‘AUA’) mode, which is subject to a limit of 2.5 per cent of AUA per annum per family of client across all services offered by IA, and (ii) Fixed fee mode, which is subject to a specified fee limit (earlier limit ₹1,25,000) per annum per family of client across all services offered by IA.
• Registration as non-individual investment adviser
o As per Regulation 13(e) of the IA Regulations, an individual IA, whose number of clients exceed three hundred at any point of time or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, is required to apply for in-principal registration as non-individual IA.
o The “number of clients” shall mean number of client agreements in force at any point of time i.e. limit of 300 clients not to be exceeded on any day.
The provisions of this circular shall come into effect on January 08, 2025.
[Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2025/003]
