1. SEBI (Investment Advisers) Regulations 2013

2. Disclaimer:
“Views expressed here are the views of the individual
and do not reflect the views or policies of the
Organization.”

3. Table of Contents
 Background
 Objectives
 Key definitions
 Exemptions
 Qualifications
 Key conditions for registration
 Capital Adequacy
 General Obligations

4. Background
 SEBI initially in 2007 issues a draft regulations on Investment Advisors inviting public
comments. The matter was thereafter discussed at various levels including FSDC sub-
committee.
 The concern has been mainly to regulate the activity of persons who call themselves,
wealth managers, private bankers, advisors etc and provide various kinds of financial
products to their clients.
 SEBI in September 2011 issued a concept paper on regulation of investment advisors and
public comments were invited.
 SEBI board in its meeting held on August 16, 2012 approved the enactment of SEBI
(Investment Advisors) Regulations
 Five months thereafter SEBI on January 21, 2013 finally notified the SEBI (Investment
Advisors) Regulations, 2013.
 These regulations shall come into force on the 90th day from the date of notification i.e
April 20, 2013.

5. Objectives
 Tackle the issue of Conflict of Interest in Distribution of Financial Products - Arising due to the
dual role played by the distributors as an agent of investors as well as of the manufacturers and
receiving compensation from both.
 Provide a regulatory framework for profile based advice, suitability and appropriateness,
enhanced disclosures and the choice of entity either to act as a advisor to the client or an agent
of the manufacturer.
 The said regulations will regulate the activity of entities who are in the business of providing
investment advice in respect of securities and investment products.
 Mandatory registration of investor advisor within six months from the effective date, minimum
net worth, qualification and certification and adherence of other compliances.
 Initially the objective was to have the investment advisors regulated through a Self Regulatory
Organisation (SRO) registered under the SEBI (Self Regulatory Organization) Regulations, 2004.
 However, no SRO has been so far registered and therefore till such time these regulations will
be implemented and regulated by SEBI directly.

6. Key Definitions
 “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:
However - 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.
 “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

7. Key Definitions
 “Consideration” means
 any form of economic benefit
 including non-cash benefit
 received or receivable for providing investment advice
 “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

8. Exemptions
 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.
 Any insurance agent or insurance broker who offers investment advice solely in insurance
products and is registered with IRDA;
 Any pension advisor who offers investment advice solely on pension products and is
registered with PFRDA
 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.
 Any advocate, solicitor or law firm, who provides investment advice to their clients, incidental
to their legal practise.

9. Exemptions
 Any member of ICAI, ICSI, ICWAI, 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.
 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

10. Exemptions
 Any fund manager, by whatever name called of a mutual fund, alternative investment fund or
any other intermediary or entity registered with the Board;
 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;
 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;
 Any other person as may be specified by the Board.

11. Qualification
 Minimum qualification
 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 or
 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.
 Certification
Certification on financial planning or fund or asset or portfolio management or investment
advisory services
 from NISM; or
 from any other organization or institution including FPSB or any recognized stock exchange
in India provided that such certification is accredited by NISM.
 For existing investment advisors two years time provided to complete the certification

12. Capital Adequacy
 In case of a Corporate
 Minimum net worth of Rs 25 lakhs
 In case of a Individual / Partnership firm
 Minimum net tangible assets of Rs 1 lakh
 For existing investment advisors – one year time provided to comply with the capital adequacy
requirement
 “Net worth” 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.

13. Consideration of application
 KEY considerations by SEBI
 appropriately qualified and certified as specified in regulation 7;
 fulfills the capital adequacy requirements as specified in regulation 8;
 fit and proper persons based on the criteria as specified in Schedule II of the Securities and
Exchange Board of India (Intermediaries) Regulations, 2008;
 infrastructure to effectively discharge the activities of an investment adviser;
 Previous history of refusal r any disciplinary action by SEBI
 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;
 Entity incorporated outside India to offer investment advisory services through a subsidiary in
India
 A foreign citizen proposes to undertake investment advisory services, it is through an office in
India
 Certificate Validity Period – 5 years from the date of issue

14. General Obligations
 include the words ‘Investment Advisor’ in its name.
 In case 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;
 Not to receive any consideration by way of remuneration or compensation or in any other form
from any person other than the client being advised,
 Not to 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.
 Disclosure of conflict of interest if any with other activities
 Follow KYC procedure
 Abide by the code of conduct specified under these regulations

15. General Obligations
 RISK Profiling - obtain information about the client
 Age, Investment objective including the time horizon
 Income details, Existing investments / assets
 Risk appetite / tolerance, Liability / borrowing details
 Suitability Process
 Investment advice is provided is appropriate to the risk profile of the client;
 Documented process for selecting investments based on client’s investment objectives and
financial situation
 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. ial product

16.  Maintenance of record for a period of 5 years for the advice provided along with the rationale
behind that advice duly signed and dated
 Disclosure to clients all material information about the investment advisor - its business,
disciplinary history, terms and conditions for offering advisory services, consideration including
those receivable by its associate / subsidiary company for execution services etc.
 Appointment of a Compliance Officer
 Grievance handling process and systems
 Segregation of execution Services from investment advisory with full disclosure to client and
without any obligation on client
 Annual Audit to be conducted by member of ICSI or ICAI.

17. Questions

18. Thank you
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