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Monday, April 22, 2013

Finally a Reality - SEBI Investment Advisor Regulations 2013

  THE GAZETTE OF INDIA EXTRAORDINARY
PART – III – SECTION 4
PUBLISHED BY AUTHORITY NEW DELHI, JANUARY 21, 2013
SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION
Mumbai, the 21st January, 2013
SECURITIES AND EXCHANGE BOARD OF INDIA
(INVESTMENT ADVISERS) REGULATIONS, 2013

No. LAD-NRO/GN/2012-13/31/1778.-In  exercise of the powers conferred by sub-section (1) of Section 30 read with clause (b) of sub-section  (2) of Section 11 of the Securities  and Exchange Board of India Act, 1992 (15 of 1992), the Securities and Exchange Board of India
hereby, makes the following regulations, namely, —

CHAPTER I
PRELIMINARY

Short title and commencement.
1.      (1)     These  regulations  may  be  called  the  Securities  and  Exchange  Board  of  India
(Investment Advisers) Regulations, 2013.
(2)    These regulations shall come into force on the ninetieth day from the date of their publication in the Official Gazette.
Definitions.
2.      (1)     In  these  regulations,  unless  the  context  otherwise  requires,  the  terms  defined herein shall bear the meanings assigned to them below, and their cognate expressions shall be construed accordingly,–
(a)     “Act” means the Securities and Exchange Board of India Act, 1992 (15 of
1992);
(b)     "Board" means the Securities and Exchange Board of India established under section 3 of the Act;
(c)    “body corporate” shall have  the meaning assigned to it in or under sub-section
(7) of section 2 of the Companies Act, 1956 (1 of 1956);
(d)    “certificate” means a certificate of registration granted under these regulations;
(e)     “change in control” in relation to a company or  a body corporate, means:
(i)       if its shares are listed  on any recognized  stock  exchange,  change  in control  within  the  meaning  of  clause  (e)  of  sub-regulation  (1)  of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(ii)     in any other case, change in the controlling interest or change in legal form.
Explanation.─ For the purpose of sub-clause (ii), the expression “controlling interest” means an interest, whether direct or indirect, to the extent of more than fifty percent of voting rights or interest;
(f)      “company” means a company incorporated under the Companies Act, 1956;
(g)    “consideration”  means  any  form  of  economic  benefit  including  non-cash benefit, received or receivable for providing investment advice;
(h)    “financial   planning”   shall  include   analysis   of  clients’   current   financial situation, identification of their financial goals, and developing and recommending financial strategies to realise such goals;
(i)     “firm”  means a partnership  firm registered   under   Indian Partnership  Act,
1932 (9 of 1932);
(j)      “form” means any of the forms set out in the First Schedule;
(k)    “inspecting authority” means any one or more persons appointed by the Board to exercise powers conferred under regulation 23;
(l)     “investment advice” means 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:
Provided that investment advice given through newspaper, magazines, any electronic or   broadcasting or telecommunications  medium, which is widely available to the public shall not be considered as investment  advice for the purpose of these regulations;
(m)   “investment adviser” means any person, who for consideration, is engaged in the  business  of providing  investment  advice  to clients  or other  persons  or group  of  persons  and  includes  any  person  who  holds  out  himself  as  an investment adviser, by whatever name called;
(n)    “limited  liability  partnership”  means  a  partnership  formed  and  registered under The Limited Liability Partnership Act, 2008(6 of  2009);
(o)    “NBFC”  means  a  Non-Banking  Financial  Company  regulated  by  Reserve
Bank of India;
(p)    “NISM” means the National Institute of Securities Market established by the
Board;
(q)    “partner”  means  partner  of  the  firm  or  a  limited  liability  partnership  who renders investment advice on behalf of the firm or limited liability partnership;
(r)     “representative” means an employee or an agent of an investment adviser who renders investment advice on behalf of that investment adviser.
(2)    The words and expressions used and not defined in these regulations but defined in the Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Companies Act, 1956 (1 of 1956), or any rules or regulations made thereunder shall have the same meanings  respectively  assigned  to  them  in  those  Acts,  rules  or  regulations  made thereunder or any statutory modification or re-enactment thereto, as the case may be.

CHAPTER II
REGISTRATION OF INVESTMENT ADVISERS

Application for grant of certificate.
3.      (1)     On and from the commencement of these regulations, no person shall act as an
investment adviser or hold itself out as an investment adviser unless he has obtained a certificate of registration from the Board under these regulations:
Provided that a person acting as an investment adviser immediately before the commencement of these regulations may continue to do so for a period of six months from such commencement or, if it has made an application for a certificate under sub- regulation (2) within the said period of six months, till the disposal of such application.
(2)    An application for grant of certificate of registration shall be made in Form A as specified in the First Schedule to these regulations and shall be accompanied by a non- refundable application fee to be paid in the manner specified in Second Schedule.
Exemption from registration.
4.      The following  persons  shall  not  be required  to seek  registration  under  regulation  3 subject to the fulfillment of the conditions stipulated therefor, —
(a)    Any person who gives general comments in good faith in regard to trends in the financial or securities market or the economic situation where such comments do not specify any particular securities or investment product;
(b)    Any insurance agent or insurance broker who offers investment advice solely in insurance products and is registered with Insurance Regulatory and Development Authority for such activity;
(c)    Any pension advisor who offers investment advice solely on pension products and is registered with Pension Fund Regulatory and Development Authority for such
activity;
(d)    Any distributor of mutual funds, who is a member of a self regulatory organisation recognised by the Board or is registered with an association of asset management companies  of  mutual  funds,  providing  any  investment  advice  to  its  clients incidental to its primary activity;
(e)    Any  advocate,  solicitor  or  law  firm,  who  provides  investment  advice  to  their clients, incidental to their legal practise;
(f)     Any member of Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Institute of Cost and Works Accountants of India, Actuarial Society of India or any other professional body as may be specified by the Board, who  provides  investment  advice  to their  clients,  incidental  to his  professional service;
(g)    Any stock broker or sub-broker registered under SEBI (Stock Broker and Sub- Broker)  Regulations,  1992,  portfolio  manager  registered  under SEBI (Portfolio Managers)   Regulations,   1993   or   merchant   banker   registered   under   SEBI (Merchant Bankers) Regulations, 1992, who provides any investment advice to its clients incidental to their primary activity:
Provided that such intermediaries shall comply with the general obligation(s) and responsibilities as specified in Chapter III of these regulations:
Provided further that existing portfolio manager offering only investment advisory services  may apply  for registration  under  these  regulations  after  expiry  of his current certificate of registration as a portfolio manager;
(h)    Any  fund  manager,  by  whatever  name  called  of  a  mutual  fund,  alternative investment fund or any other intermediary or entity registered with the Board;
(i)     Any person who provides investment advice exclusively to clients based out of
India:
Provided  that  persons  providing  investment  advice  to  Non-Resident  Indian  or
Person of Indian Origin shall fall within the purview of these regulations;
(j)     Any representative and partner of an investment adviser which is registered under these regulations:
Provided that such representative  and partner shall comply with regulation 7 of these regulations;
(k)    Any other person as may be specified by the Board.
Furnishing of further information, clarification and personal representation.
5.      (1)     The Board may require the applicant to furnish further information or clarification regarding   matters   relevant   to  investment   advisory   services   for  the  purpose   of consideration of the application filed under sub-regulation (2) of regulation 3.
(2)    The applicant or his authorised representative, if so required, shall appear before the Board for personal representation.
Consideration of application and eligibility criteria.
6.      For the purpose of the grant of certificate the Board shall take into account all matters which  are  relevant  to  the  grant  of  certificate  of  registration  and  in  particular  the following, namely, —
(a)    whether the applicant is an individual or a body corporate or a firm;
(b)    whether in case the applicant is an individual, he is appropriately qualified and certified as specified in regulation 7;
(c)    whether in case the applicant is a body corporate, all the representatives  of the applicant who provide investment advice are appropriately qualified and certified as specified in regulation 7;
(d)    whether  in  case  the  applicant  is  a  firm  or  a  limited  liability  partnership,  all partners who are engaged in giving investment advice are qualified and certified as specified in regulation 7.
(e)    whether the applicant  fulfills the capital adequacy  requirements  as specified in regulation 8;
(f)     whether the applicant, its representatives and partners, if any,  are fit and proper persons  based  on the criteria  as specified  in Schedule  II of the Securities  and Exchange Board of India (Intermediaries) Regulations, 2008;
(g)    whether the applicant has the necessary infrastructure to effectively discharge the activities of an investment adviser;
(h)    whether  the  applicant  or  any  person  directly  or  indirectly  connected  with  the applicant  has  in the  past  been  refused  certificate  by the  Board  and  if so,  the grounds for such refusal;
(i)     whether  any  disciplinary  action  has  been  taken  by  the  Board  or  any  other regulatory  authority  against  any person  directly  or indirectly  connected  to the applicant under the respective Act, rules or regulations made thereunder;
(j)     In case a bank or an NBFC proposes to undertake investment advisory services, whether it has been permitted by Reserve Bank of India and the application is made through a subsidiary or separately identifiable department or division;
(k)    In case any body corporate,  other than a Bank  or NBFC,  which  proposes   to undertake investment advisory services, whether, the application is made through a separately identifiable department or division;
(l)     In  case  an  entity  incorporated  outside  India  undertakes  to  provide  investment advisory services under these regulations, whether, it has set up a subsidiary in India and whether such subsidiary has made the application for registration;
(m)   In  case  a  foreign  citizen  proposes  to  undertake  investment  advisory  services, whether  the applicant  has set up an office  in India  and proposes  to undertake investment advisory services through such office.
Qualification and certification requirement.
7.      (1)     An individual  registered  as an investment  adviser  under  these  regulations  and partners and representatives of an investment adviser registered under these regulations offering  investment  advice  shall  have  the  following  minimum  qualifications,  at  all times:
(a)    A professional qualification or post-graduate degree or post graduate diploma in finance,   accountancy,   business   management,   commerce,   economics,   capital market, banking, insurance or actuarial science from a university or an institution recognized  by the central government  or any state government  or a recognised foreign university or institution or association; or
(b)    A graduate in any discipline with an experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.
(2)    An individual registered as an investment adviser and partners and representatives of investment  advisers  registered  under these  regulations  offering  investment  advice shall have, at all times, a certification on financial planning or fund or asset or portfolio management or investment advisory services:
(a)    from NISM; or
(b)    from any other organization or institution including Financial Planning Standards Board India or any recognized stock exchange in India provided that such certification is accredited by NISM.:
Provided   that  the  existing   investment   advisers   seeking   registration   under   these regulations shall ensure that their partners and representatives obtain such certification within two years from the date of commencement of these regulations:
Provided further that fresh certification must be obtained before expiry of the validity of the existing certification to ensure continuity in compliance with certification requirements.
Capital adequacy.
8.      (1)     Investment advisers which are body corporate shall have a net worth of not less than twenty five lakh rupees.
Explanation.─  For  the  purposes  of  this  regulation,  "networth"  means  the  aggregate value  of paid up share  capital plus free  reserves  (excluding  reserves  created  out of revaluation) reduced by the aggregate value of accumulated losses, deferred expenditure not written off, including miscellaneous expenses not written off, and capital adequacy requirement for other services offered by the advisers in accordance with the applicable
rules and regulations.
(2)    Investment  advisers  who  are  individuals  or  partnership  firms  shall  have  net tangible assets of value not less than rupees one lakh:
Provided that existing investment advisers shall comply with the capital adequacy requirement within one year from the date of commencement of these regulations.
Grant of certificate of registration.
9.      The  Board  on  being  satisfied  that  the  applicant  complies  with  the  requirements specified in regulation 6 shall send intimation to the applicant and on receipt of the payment of registration/renewal fees as specified in Second Schedule, grant certificate of registration in Form B under First Schedule, subject to such terms and conditions as the Board may deem fit and appropriate.
Period of validity of certificate.
10.    The certificate of registration granted under regulation 9 shall be valid for a period of five years from the date of its issue.
Renewal of certificate.
11.    (1)     Three months before the expiry of the period of validity of the certificate,  the investment adviser may, if he so desires, make an application in Form A for grant of renewal of certificate of registration.
(2)    The application  for renewal under sub-regulation  (1) shall be dealt with in the same manner as if it were an application made under sub-regulation (2) of regulation 3 for grant of certificate.
Procedure where registration is refused.
12.    (1)     After considering an application made under regulation 3, if the Board is of the opinion that a certificate should not be granted to the applicant, it may reject the application after giving the applicant a reasonable opportunity of being heard.
(2)    The decision of the Board to reject the application shall be communicated to the applicant within thirty days of such decision.
(3)    Where an application for a certificate is rejected by the Board, the applicant shall forthwith cease to act as an investment adviser:
Provided  that  nothing  contained  in  this  regulation  shall  affect  the  liability  of  the applicant towards its existing clients under law.
Conditions of certificate.
13.    The certificate granted under regulation 9 shall, inter alia, be subject to the following conditions:-
(a)    the  investment  adviser  shall  abide  by  the  provisions  of  the  Act  and  these regulations;
(b)    the  investment  adviser  shall  forthwith  inform  the  Board  in  writing,  if  any information or particulars previously submitted to the Board are found to be false
or misleading in any material particular or if there is any material change in the information already submitted;
(c)    the   investment   adviser,   not   being   an  individual,   shall   include   the  words
‘investment adviser’ in its name:
Provided that if the investment advisory service is being provided by a separately identifiable   department   or  division   or  a  subsidiary,   then  such     separately identifiable   department   or   division   or   subsidiary   shall   include   the   words
‘investment adviser’ in its name;
(d)    individuals  registered  as  investment  advisers  shall  use  the  term  ‘investment adviser’ in all their correspondences with their clients.
Recognition of body or body corporate for regulation of investment advisers.
14.    (1)     The  Board  may  recognize  any  body  or  body  corporate  for  the  purpose  of regulating investment advisers.
(2)    The  Board  may,  at  the  time  of  recognition  of  such  body  or  body  corporate, delegate administration and supervision of investment advisers to such body or body corporate on such terms and conditions as may be specified by the Board.
(3)    The Board may specify that no person shall act as an investment adviser unless he is a member of a recognized body or body corporate and in such event, provisions of these regulations and byelaws or articles of such body or body corporate shall apply mutatis mutandis to such investment advisers.

CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES

General responsibility.

15.    (1)     An investment  adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.
(2)      An   investment   adviser   shall   not   receive   any   consideration   by   way   of remuneration  or compensation  or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.
(3)    An  investment  adviser  shall  maintain  an  arms-length  relationship  between  its activities as an investment adviser and other activities.
(4)    An investment adviser which is also engaged in activities other than investment advisory   services   shall  ensure  that  its  investment   advisory   services   are  clearly segregated from all its other activities, in the manner as prescribed hereunder.
(5)    An investment adviser shall ensure that in case of any conflict of interest of the investment  advisory activities  with other activities,  such conflict  of interest  shall be disclosed to the client.
(6)    An investment  adviser shall not divulge  any confidential  information  about its client, which has come to its knowledge, without taking prior permission of its clients, except where such disclosures are required to be made in compliance with any law for the time being in force.
(7)    An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice.
Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account  after giving such revised  assessment  to the client at least 24 hours in advance of entering into such transaction.
(8)    An investment advisor shall follow Know Your Client procedure as specified by the Board from time to time.
(9)    An  investment  adviser  shall  abide  by  Code  of  Conduct  as  specified  in  Third
Schedule.
(10)        An investment  adviser  shall not act on its own account,  knowingly  to sell securities or investment products to or purchase securities or investment product from a client.
(11)  In case of change in control of the investment adviser, prior approval from the
Board shall be taken.
(12)  Investment advisers shall furnish to the Board information and reports as may be specified by the Board from time to time.
(13) It shall be the responsibility of the Investment Adviser to ensure that its representatives   and   partners,   as   applicable,   comply   with   the   certification   and qualification requirements under Regulation 7 at all times.
Risk profiling.
16.    Investment adviser shall ensure that,-
(a)   it obtains from the client, such information as is necessary for the purpose of giving investment advice, including the following:-
(i)   age;
(ii)  investment objectives including time for which they wish to stay invested, the purposes of the investment ;
(iii) income details;
(iv) existing investments/ assets;
(v)   risk appetite/ tolerance;
(vi) liability/borrowing details.
(b)   it has a process for assessing the risk a client is willing and able to take, including:
(i)   assessing a client’s capacity for absorbing loss;
(ii)  identifying whether client is unwilling or unable to accept the risk of loss of capital;
(iii) appropriately  interpreting  client  responses  to  questions  and  not  attributing inappropriate weight to certain answers.
(c)   where tools are used for risk profiling, it should be ensured that the tools are fit for the purpose and any limitations are identified and mitigated;
(d)   any questions or description in any questionnaires used to establish the risk a client is willing and able to take are fair, clear and not misleading, and should ensure that:
(i)   questionnaire is not vague or use double negatives or in a complex language that the client may not understand;
(ii)  questionnaire is not structured in a way that it contains leading questions.
(e)   risk profile of the client is communicated to the client after risk assessment is done; (f)   information provided by clients and their risk assessment is updated periodically.
Suitability.
17.    Investment adviser shall ensure that,-
(a)   All investments on which investment advice is provided is appropriate to the risk profile of the client;
(b)   It has a documented process for selecting investments based on client’s investment objectives and financial situation;
(c)   It understands the nature and risks of products or assets selected for clients;
(d)   It has a reasonable basis for believing that a recommendation or transaction entered into:
(i)     meets the client’s investment objectives;
(ii)    is such that the client is able to bear any related investment risks consistent with its investment objectives and risk tolerance;
(iii)   is  such  that  the  client  has  the  necessary  experience  and  knowledge  to understand the risks involved in the transaction.
(e)   Whenever  a  recommendation  is  given  to  a  client  to  purchase  of  a  particular complex  financial  product,  such  recommendation  or  advice  is  based  upon  a
reasonable assessment that the structure and risk reward profile of financial product
is  consistent  with  clients  experience,   knowledge,   investment  objectives,  risk appetite and capacity for absorbing loss.
Disclosures to clients.
18.    (1)     An  investment   adviser  shall  disclose   to  a  prospective   client,  all  material information about itself including its business, disciplinary history, the terms and conditions on which it offers advisory services, affiliations  with other intermediaries and such other information as is necessary to take an informed decision on whether or not to avail its services.
(2)    An investment  adviser shall disclose to its client, any consideration  by way of remuneration or compensation or in any other form whatsoever, received or receivable by it or any of its associates or subsidiaries for any distribution or execution services in respect of the products or securities for which the investment advice is provided to the client.
(3)    An investment adviser shall, before recommending the services of a stock broker or other intermediary to a client, disclose any consideration by way of remuneration or compensation  or in any other form whatsoever,  if any, received or receivable by the investment adviser, if the client desires to avail the services of such intermediary.
(4)    An investment adviser shall disclose to the client its holding or position, if any, in the financial products or securities which are subject matter of advice.
(5)    An investment adviser shall disclose to the client any actual or potential conflicts of interest arising from any connection to or association with any issuer of products/ securities, including any material information or facts that might compromise its objectivity or independence in the carrying on of investment advisory services.
(6)    An investment adviser shall, while making an investment advice, make adequate disclosure to the client of all material facts relating to the key features of the products or securities, particularly, performance track record.
(7)    An  investment   adviser   shall   draw   the   client’s   attention   to  the   warnings, disclaimers in documents, advertising materials relating to an investment product which it is recommending to the client.
Maintenance of records.
19.    (1)   An investment adviser shall maintain the following records,-
(a)   Know Your Client records of the client;
(b)   Risk profiling and risk assessment of the client;
(c)   Suitability assessment of the advice being provided; (d)   Copies of agreements with clients, if any;
(e)   Investment advice provided, whether written or oral;
(f)   Rationale for arriving at investment advice, duly signed and dated;
(g)   A register or record containing list of the clients, the date of advice, nature of the advice, the products/securities  in which advice was rendered and fee, if any charged for such advice.
(2) All records shall be maintained either in physical or electronic form and preserved for a minimum period of five years:
Provided  that  where  records  are  required  to  be  duly  signed  and  are  maintained  in electronic form, such records shall be digitally signed.
(3) An investment adviser shall conduct yearly audit in respect of compliance with these regulations from a member of Institute of Chartered Accountants of India or Institute of Company Secretaries of India.
Appointment of compliance officer.
20.     An investment adviser which is a body corporate or a partnership firm shall appoint a compliance officer who shall be responsible for monitoring the compliance by the investment adviser in respect of the requirements of the Act, regulations, notifications, guidelines, instructions issued by the Board.
Redressal of client grievances.
21.    (1)     An investment adviser shall redress client grievances promptly.
(2)    An investment  adviser shall have adequate procedure for expeditious  grievance redressal.
(3)    Client grievances pertaining to financial products in which investments have been made based on investment advice, shall fall within the purview of the regulator of such financial product.
(4)    Any  dispute  between  the  investment  adviser  and  his  client  may  be  resolved through arbitration or through Ombudsman authorized or appointed for the purpose by any regulatory authority, as applicable.
Segregation of execution services.
22.    Investment advisers which are banks, NBFCs and body corporate providing distribution or execution services to their clients shall keep their investment advisory services segregated from such activities:
Provided that such distribution or execution services can only be offered subject to the following:
(a)   The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser.
(b)   The  investment   adviser  shall  maintain  arms  length  relationship   between  its
activities as investment adviser and distribution or execution services.
(c)   All fees and charges  paid to distribution  or execution  service  providers  by the client shall be paid directly to the service providers and not through the investment
adviser.

CHAPTER IV
INSPECTION

Board’s right to inspect.
23.    The Board may suo motu or upon receipt of information or complaint appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents relating to investment advisers for any of the following reasons, namely: -
(a)    to ensure that the books of account, records and documents are being maintained by the investment adviser in the manner specified in these regulations;
(b)    to inspect into complaints received from clients or any other person, on any matter having a bearing on the activities of the investment adviser;
(c)    to ascertain  whether  the provisions  of the Act and these  regulations  are being complied with by the investment adviser;
(d)    to inspect into the affairs of a investment adviser, in the interest of the securities market or in the interest of investors.
Notice before inspection.
24.    (1)     Before ordering an inspection under regulation 23, the Board shall give not less than ten days notice to the investment adviser.
(2)    Notwithstanding  anything  contained  in  sub-regulation  (1),  where  the  Board  is satisfied that in the interest of the investors no such notice should be given, it may by an order in writing direct that the inspection of the affairs of the investment  adviser be taken up without such notice.
(3)    During  the  course  of  an  inspection,  the  investment  adviser  against  whom  the inspection is being carried out shall be bound to discharge its obligations as provided in regulation 25.
Obligation of investment adviser on inspection.
25.    (1)     It shall be the duty of every investment adviser in respect of whom an inspection has been ordered  under the regulation  23 and any other associate  person  who is in possession of relevant information pertaining to conduct and affairs of such investment adviser,  including  representative  of  investment  adviser,  if  any,  to  produce  to  the inspecting authority such books, accounts and other documents in his custody or control and furnish him with such statements and information as the inspecting authority may require for the purposes of inspection.
(2)    It shall be the duty of every investment adviser and any other associate person who is in possession of relevant information pertaining to conduct and affairs of the investment  adviser  to  give  to the  inspecting  authority  all  such  assistance  and  shall
extend all such co-operation as may be required in connection with the inspection and
shall furnish such information as sought by the inspecting authority in connection with the inspection.
(3)    The  inspecting  authority  shall,  for  the  purposes  of  inspection,  have  power  to examine  on  oath  and  record  the  statement  of any employees,  directors,  partners  or person responsible  for or connected  with the activities  of investment  adviser or any other  associate  person  having  relevant  information  pertaining  to  such  investment adviser.
(4)    The  inspecting  authority  shall,  for  the  purposes  of  inspection,  have  power  to obtain authenticated copies of documents, books, accounts of investment adviser, from any person having control or custody of such documents, books or accounts.
Submission of report to the Board.
26.    The inspecting  authority shall, as soon as possible,  on completion  of the inspection submit an inspection report to the Board:
Provided that if directed to do so by the Board, the inspecting authority may submit an interim report.
Action on the inspection report.
27.    The Board may after consideration of the inspection report and after giving reasonable opportunity of hearing to the investment advisers or its authorized representatives, issue such directions as it deems fit in the interest of securities market or the investors including,-
(a)   requiring an investment adviser not to provide investment advice for a particular period;
(b)   requiring the investment adviser to refund any money  collected as fees, charges or commissions  or  otherwise   to  the  concerned  clients  along  with  the  requisite interest.
(c)   prohibiting  the  investment   adviser  from  operating  in  the  capital  market  or accessing the capital market for a specified period.

CHAPTER V
PROCEDURE FOR ACTION IN CASE OF DEFAULT

Liability for action in case of default.
28.    An investment adviser who -
(a)   contravenes  any of the provisions  of the Act or any regulations  or circulars issued thereunder;
(b)   fails to furnish any information relating to its activity as an investment adviser as required by the Board;
(c)   furnishes to the Board information which is false or misleading in any material particular;
(d)   does not submit periodic returns or reports as required by the Board;
(e)   does not co-operate in any enquiry, inspection or investigation conducted by the
Board;
(f)   fails to resolve the complaints of investors or fails to give a satisfactory reply to the Board in this behalf,
shall be dealt with in the manner provided under the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.

CHAPTER VI
MISCELLANEOUS

Power of the Board to issue clarifications etc.
29.    In  order  to  remove  any  difficulties  in  the  application  or  interpretation  of  these regulations, the Board may issue clarifications and guidelines in the form of circulars.
Power of the Board over body or body corporate recognized under regulation 14.
30.    The Board reserves the right to alter, modify and overrule any decision, action taken or penalties imposed by the body or body corporate recognized under regulation 14.


FIRST SCHEDULE
FORM A


Securities and Exchange Board of India (Investment Advisers) Regulations, 2013 [See Regulations 3 and 11]
Application for Grant of Certificate of Registration/Renewal  as investment adviser
Securities and Exchange Board of India
SEBI Bhavan, C4-A, G Block, Bandra Kurla Complex, Bandra (East),  Mumbai 400051 – India

INSTRUCTIONS
1.   This form is meant for use by the applicant for grant of certificate of registration as an investment adviser.
2.   The  applicant  should  complete  this  form,  and  submit  it,  along  with  all  supporting documents to the Board at its head office at Mumbai.
3.   This application form should be filled in accordance with these regulations.
4.   The application shall be considered by the Board provided it is complete in all respects.
5.   All answers must be legible and all the pages must be numbered with signature/ stamp on each page of the form.
6.   Information which needs to be supplied in more detail may be given on separate sheets which should be attached to the application form and appropriately numbered.
7.   The application must be signed.
8.   The application must be accompanied by an application fee as specified in the Second
Schedule to these regulations.
1.   GENERAL INFORMATION
(a) Name, address of the registered office, address for correspondence  and principal place  of  business,  telephone  number(s),  fax  number(s),  e-mail  address  of  the applicant.
(b) Whether application is for registration/ renewal. Provide registration number if the application is for renewal of certificate.
(c) Name, direct line number, mobile number and e-mail of the contact person(s).
(d) Legal  structure  of  applicant  -  Whether  the  applicant  is  an  individual,  body corporate (including company), partnership firm or limited liability partnership.
(e) Whether the applicant is a bank /NBFC.
(f)  Date  and  place  of  incorporation/   establishment,   if  any.  If  the  applicant  is incorporated outside India, details of such incorporation.
(g) Whether the applicant is engaged in investment advisory services prior to making application under these regulations.
(h) Whether  the  applicant  is  registered  with  SEBI,  RBI,  IRDA  or  PFRDA  in  any capacity. If so, details of such registration.
(i)  Write-up on the activities of the applicant.
(For renewal application, provide details of existing investment advisory services including number and type of clients, assets under advice, revenue, profitability, products/ securities on which investment advice was provided, etc.)
2.   DETAILS OF APPLICANT (Provide details of only the section applicable to you)
I. In case applicant is an individual:

1.   Whether the applicant has:
a.   A   professional   qualification   or   post-graduate   degree   or   post graduate  diploma  in finance,  accountancy,  business  management, commerce,   economics,   capital   market,   banking,   insurance   or actuarial science from a university or an institution recognized by the Central Government or any State Government or a recognised foreign university or institution or association; or
b.   A graduate in any discipline with an experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.
(Provide self certified copies of supporting documents).
2.   Copy of certification obtained in accordance with regulation 7(2).
(If the applicant is an existing investment adviser applying for fresh registration,  then  provide  a declaration  stating  that it shall obtain such certification within two years from the date of commencement of these regulations and submit a copy of the certification to the Board within 15 days of receipt of such certification.)
3.   Number of employees and agents of the applicant, if any, who shall render investment  advice  under  these  regulations  on  behalf  of  the  applicant. Provide documents as mentioned in points (1) to (2) above for such employees/ agents.
4.   Enclose identity proof and address proof of the applicant.
5.  Details of ownership/directorship of the applicant in any companies or partnership interest in any firm or limited liability partnership.
6.   Copy of Income Tax Return/ Copy of Form 16 for the last 3 years.
7.   Copy  of assets  and liabilities  statement  and certification  of  net tangible assets certified by a chartered accountant (not more than six months old at the time of filing of application). Please note that membership number of the Chartered accountant must be included in the certificate,
II. In case applicant is a company:
1.   Shareholding pattern and profile of the directors (Enclose identity proof and address proof of the directors).
2.   Number of employees and agents of the applicant (hereinafter referred to as
‘representatives’)  who render/ propose to render investment advice under these regulations on behalf of the applicant.
3.   Declaration by the applicant that its representatives currently comply with the certification and qualification  requirements under regulation 7. (If the applicant is an existing investment adviser applying for fresh registration, then provide a declaration stating that the applicant shall ensure that all its representatives obtain such certification within two years from the date of commencement of these regulations and after all its representatives obtain the certification, a declaration to that effect shall be submitted to SEBI.)
4.   Declaration  by  the  applicant  that  it  shall  ensure  that  its  representatives comply   with   the   certification   and   qualification   requirements   under Regulation 7 at all times.
5.   List of associated companies registered with SEBI, RBI, IRDA or PFRDA
along with the registration number.
6.   If  applicant  is  a  bank  or  NBFC,  then  copy  of  approval  from  RBI  for undertaking investment advisory services.
7.   Net worth certificate by a chartered accountant, not more than six months old. Please note that membership number of the chartered accountant must be included in the certificate,
III. In case applicant is a partnership firm or a limited liability partnership:
1.   Names and Beneficial ownership pattern of the partners engaged/proposed to engage in investment advice (Enclose identity proof and address proof of the partners).
2.   Whether the aforesaid partners have:
a.   A   professional   qualification   or   post-graduate   degree   or   post graduate  diploma  in finance,  accountancy,  business  management, commerce,   economics,   capital   market,   banking,   insurance   or
actuarial science from a university or an institution recognized by
the Central Government or any State Government or a recognised foreign university or institution or association; or
b.   A graduate in any discipline with an experience of at least five years in activities relating to advice in financial products or securities or fund or asset or portfolio management.
(Provide self certified copies of supporting documents).
3.   Copy of certification obtained by the aforesaid partners in accordance with regulation 7(2).
(If  the  applicant  is  an  existing  investment  adviser  applying  for  fresh
registration,   then  provide  a  declaration  stating  that  all  the  partners engaged  in  investment  advice  shall  obtain  such  certification  within  two years from the date of commencement  of these regulations  and after all such partners obtain the certification, a declaration to that effect shall be submitted to SEBI.)
4.   Declaration that the aforesaid partners shall obtain fresh certification before expiry of the validity of the existing certification  to ensure continuity in compliance with certification requirements.
5.   Copy  of assets  and  liabilities  statement  and certification  of net tangible assets of the partnership firm certified by a chartered accountant (not more than six months old at the time of filing of application).  Please note that membership  number of the chartered accountant must be included in the certificate.
IV. In case applicant  is a body corporate  (other than company  or limited liability partnership):
1.   Shareholding pattern and profile of the directors (Enclose identity proof and address proof of the directors).
2.   Whether the applicant is set up or established under the laws of the Central
or State Legislature and whether the applicant is permitted to carry on of the  activity  of  an  investment  adviser  (Enclose  relevant  extract  of  the relevant Statute/Act).
3.   Number of employees and agents of the applicant (hereinafter referred to as
‘representatives’)  who render/ propose to render investment advice under these regulations on behalf of the applicant.
4.   Declaration by the applicant that its representatives currently comply with the certification and qualification  requirements under regulation 7. (If the applicant is an existing investment adviser applying for fresh registration, then provide a declaration stating that the applicant shall ensure that all its representatives obtain such certification within two years from the date of commencement of these regulations and after all its representatives obtain
the certification, a declaration to that effect shall be submitted to SEBI.)
5.   Declaration  by  the  applicant  that  it  shall  ensure  that  its  representatives comply   with   the   certification   and   qualification   requirements   under regulation 7 at all times.
6.   Net worth certificate by a chartered accountant, not more than six months old. Please note that membership number of the chartered accountant must be included in the certificate.
3.   BUSINESS PLAN
1.   Proposed business plan & means of achieving the same.
2.   The type of products/ securities on which investment advice is proposed to be rendered.
3.   Process  for  risk  profiling  of  the  client  and  for  assessing  suitability  of advice.
4.   DETAILS OF INFRASTRUCTURE
1.   Details   of   office   space,   office   equipment,   furniture   and   fixtures, communication  facilities,  research  capacity,  research  software  for undertaking investment advisory services.
2.   Declaration that the applicant has the necessary infrastructure to effectively
discharge the activities of an investment adviser.
5.   EXECUTION SERVICES
1.   If the applicant is a body corporate, whether the applicant proposes to offer distribution or execution services to its clients.
2.   If yes, provide a declaration that the services are being offered through a subsidiary/ separately identifiable department or division.
6.   OTHER INFORMATION/DECLARATIONS/ REGULATORY ACTIONS
(a) Details of all settled and pending disputes in the last 5 years.
(b) Whether any previous application for grant of certificate made by any person directly or indirectly connected with the applicant has been rejected by the Board; If yes, provide details of the same.
(c) Whether any disciplinary action has been taken by the Board or any other regulatory authority against any person directly or indirectly connected with the applicant under the Act or the regulations made there under in the last 5 years. If yes, provide details of the action.
(d) Whether the applicant/directors/promoters/  partners have been indicted/involved  in any economic offence in the last 5 years. If yes, provide details of the same.
(e) A  credit  report/  score  from  CIBIL  for  the  applicant.(For  applicants  other  than
financial institutions & banking companies)
(f)  Declaration  that the applicant,  its representatives  and partners,  if any, are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;
(g) Declaration   that  the  applicant  shall  not  obtain  any  consideration   by  way  of
remuneration or compensation or any other form whatsoever, from any person other
than the client being advised, in respect of the underlying products or securities for which advice is provided to the client.
(h) Any other information considered relevant to the nature of services to be rendered by the applicant.
7.   DECLARATION STATEMENT
I/We hereby agree and declare that the information supplied in the application, including the attachment sheets, is complete and true.
AND I/ we further agree that, I/we shall notify the Securities and Exchange Board of
India immediately any change in the information provided in the application.
I/ We further agree that I/ we shall comply with, and be bound by the Securities and Exchange  Board of India Act, 1992, and the Securities  and Exchange  Board of India (Investment Advisers) Regulations, 2013, guidelines/instructions as may be announced by the Securities and Exchange Board of India from time to time.
I/  We  further  agree  that  as  a  condition  of  registration,  I/  we  shall  abide  by  such operational instructions/directives as may be issued by the Securities and Exchange Board of India from time to time.
For and on behalf of                                                                                                           
(Name of the applicant)
Authorized signatory/ Applicant
(Signature)
(Date and Place)

FORM B
Certificate of registration as investment adviser

Securities and Exchange Board of India (Investment Adviser) Regulations, 2013 [See regulation 9]
 
I. In exercise of the powers conferred by sub-section (1) of section 12 of the Securities and
Exchange Board of India Act, 1992 (15 of 1992), read with the regulations made there under, the Board hereby grants a certificate of registration to
________________________________________________________________________
as an investment adviser subject to the conditions specified in the Act and in the regulations
made thereunder.
II. The Registration Number of the investment adviser is
IN/IA/  _________________
Date :
Place : MUMBAI
By Order
Sd/- For and on behalf of
Securities and Exchange Board of India

SECOND SCHEDULE
FEES


Securities and Exchange Board of India (Investment Advisers) Regulations, 2013
[Regulation 9]
1.   Every applicant shall pay non-refundable application fees of five thousand rupees along with the application for grant or renewal of certificate of registration.
2.   Applicants  which  are  individuals  and  firms  shall  pay  a  sum  of  ten  thousand rupees as registration/ renewal fee at the time of grant or renewal of certificate by the Board.
3.   A body corporate shall pay a sum of one lakh rupees as registration/ renewal fee at the time of grant or renewal of certificate by the Board.
4.   The fee referred to in paragraph 1, 2 and 3 shall be paid by the applicant within fifteen days from the date of receipt of intimation from the Board by a demand draft in favor of 'Securities and Exchange Board of India' payable at Mumbai or at respective regional or local office.

THIRD SCHEDULE
CODE OF CONDUCT FOR INVESTMENT ADVISER

Securities and Exchange Board of India (Investment Advisers) Regulations, 2013
[See sub-regulation (9) of regulation 15]
1.   Honesty and fairness
An investment adviser shall act honestly, fairly and in the best interests of its clients and in the integrity of the market.
2.   Diligence
An investment adviser shall act with due skill, care and diligence in the best interests of its clients and shall ensure that its advice is offered after thorough analysis and taking into account available alternatives.
3.   Capabilities
An investment adviser shall have and employ effectively appropriate resources and procedures which are needed for the efficient performance of its business activities.
4.   Information about clients
An investment  adviser shall seek from its clients, information about their financial situation, investment experience and investment objectives relevant to the services to be provided and maintain confidentiality of such information.
5.   Information to its clients
An   investment   adviser   shall   make   adequate   disclosures   of   relevant   material information while dealing with its clients.
6.   Fair and reasonable charges
An investment  adviser advising a client may charge fees, subject to any ceiling as may be specified by the Board, if any. The investment adviser shall ensure that fees charged to the clients is fair and reasonable.
7.   Conflicts of interest
An investment adviser shall try to avoid conflicts of interest as far as possible and when they cannot be avoided, it shall ensure that appropriate disclosures are made to the clients and that the clients are fairly treated.
8.   Compliance
An investment adviser including its representative(s) shall comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of clients and the integrity of the market.
9.   Responsibility of senior management
The senior management of a body corporate which is registered as investment adviser shall  bear  primary  responsibility   for  ensuring   the  maintenance   of  appropriate standards of conduct and adherence to proper procedures by the body corporate.

U. K. SINHA CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA

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