Investment Advisors (IAs) will now need to report details about their social media presence twice in a year to a supervisory body appointed by the market regulator.
The advisors will need to declare their presence on Facebook, Twitter and on other social media platforms, and disclose account, page, channel or other details, according a circular issued by the Securities and Exchange Board of India (Sebi) on May 7.
Anand Kankani, a practising company secretary who counsels investment advisors and research analysts, told Moneycontrol that this is a new requirement put forward by Sebi and it will make it easier for the supervisory body to track the IA's online activities.
"Even earlier Sebi had jurisdiction over the registered entity's online activities but now, with the regulator explicitly asking for the details, it will become easier to track these activities even during routine checks. Also, if the IA does not declare a social-media handle, it will invite regulatory action now."
The Sebi circular requires these details to be reported to the Investment Advisers Administration and Supervisory Body (IAASB), which has been recognised by Sebi. Reporting will need to be done on half-yearly basis on September 30 and March 31 of every financial year.
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The Sebi circular said, "Pursuant to formation of Industry Standards Forum (“ISF”) for IAs, ISF has discussed the development of a standardized format for periodic reporting for IAs and has provided its recommendations to SEBI in this regard."
It added, "Based on the recommendations received from ISF, a standardized periodic reporting format for submission of information by IAs pertaining to their activities on periodic basis has been prepared."
Besides social media presence, the period reporting format will capture details such as "bank accounts that have been set up for receiving advisory fee, trade or brand names, address details, number of branches, shareholding pattern that must have details of shareholders with 10 percent or more holding, details of advertisements issued, and number of complaints received, pending and resolved."
Bank account details are particularly important in case the IA is found in violation of regulations while servicing clients, as the regulator can then impound illegal gains arising from advisory fee. Otherwise, market participants believe the IA can claim the amount has came from friends or relatives, or is income from other sources.
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