The market regulator has eased compliance norms for research analysts (RAs) and investment advisors (IAs). The new norms will have reduced requirements in educational qualification, experience, refreshing the certification and networth; and will allow entities to function as both RAs and IAs and to seek registration as part-time RA or IA; and will have guidelines on model portfolios given by RAs.
In a press statement issued after meeting with its Board on September 30, the Securities and Exchange Board of India (Sebi) stated, "The Board approved the proposal of review of the regulatory framework for
IAs and RAs to facilitate ease of doing business by providing relaxation in eligibility criteria for registration and simplifying the compliance requirements."
Some of the key proposals are:
Relaxation in eligibility criteria for IAs and RAs:
1.The minimum qualification requirement is to be reduced to graduate degree in specified fields.
2.There shall be no requirement of experience for registration as IA and RAs.
3.IAs/RAs shall be required to have base certifications (NISM SeriesXA and XB for IAs, and NISM-Series-XV for RAs) only initially at the time of registration. There shall be no requirement to obtain base certifications afresh subsequently. However, a certification based on incremental changes/developments would be required.
4.Net-worth requirement shall be replaced with a reduced requirement of deposits, as specified.
Ease in compliance requirements of IAs and RAs:
1.Applicants shall be allowed to seek registration as both IA and RA.
2. Applicants (individual/partnership firm) engaged in other business activities and employment (other than related to securities and subject to certain conditions), shall be allowed to seek registration as Part-time IA/ Part-time RA. They shall be required to disclose the nature of other activities and shall ensure that there is no conflict of interest between IA/RA activities and their full time business activities.
3.IAs shall have the flexibility to change the modes of charging fees (fixed fee mode or AUA based mode) to clients subject to the fee being within the relevant threshold. Maximum fee has also been prescribed for RAs from their clients. Fee related proofs would apply only to clients other than accredited investors and non-individual clients.
4. The requirement for corporatization by individual IAs has been relaxed. The threshold would now be 300 clients or fee collection of Rs 3 crore during the financial year, whichever is earlier as compared with the existing threshold of 150 clients.
5.Proxy advisers shall be exempted from the Research Analyst Administration and Supervision Body (RAASB) framework.
Clarifications/changes to align with the evolving nature of the business:
1.Clarity in the scope of investment advice provided by IAs- only Investment advice related to securities under purview of SEBI shall fall under the purview of IA Regulations.
2.Use of Artificial Intelligence in IA and RA services- the responsibility of investment advisory services/research services lies solely with the IA/ RA, irrespective of the scale and scenario of IA/ RA using AI tools.
3.Guidelines for recommendation of model portfolios by RAs.
4.Clarity in applicability of IA and RA Regulations to trading call providers- Trading call providers shall not fall under SEBI (Investment Advisers) Regulations, 2013 and would need to comply with SEBI (Research Analysts) Regulations, 2014,
On August 6, the regulator had floated a consultation paper on these changes.
The consultation paper was released a few days after Sebi's Whole-Time Member Kamlesh Varshney had discussed this as part of seven-part strategy to manage the increase in the number of finfluencers who operate as unregistered advisors. Varshney was speaking at Ficci's 21st Annual Capital Markets Conference held on August 2. One part of the strategy was to ease norms for registered advisors and analysts, so that it becomes easier for more people to register themselves and come under the regulator's purview.
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