Sebi proposes sweeping relaxations to regulations for investment advisors, research analysts

The regulator has proposed reducing the education qualification to register as IA and RA.

The market regulator has proposed various relaxations in the Research Analyst (RA) Regulations and Investment Advisor (IA) Regulations, through a consultation paper released on August 6.

The paper comes just a few days after the regulator'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.

The Securities and Exchange Board of India (Sebi) has suggested that existing minimum qualification for registration as IA or RA be reduced from post-graduation to a graduate degree, to dispense with the experience requirements, to dispense with the requirement of minimum net worth at all times by IAs and RAs, to allow registration for an entity as both IA and RA, consider registration of part-time RA or IA for applicants who are engaged in business activity unrelated to managing assets and providing investment advice, among other relaxations.

Public comments and suggestions need to be sent in by August 26.

Among the suggestions is also a framework to governing client-level segregation of research and distribution services by RAs and guidelines for recommendations of a model portfolio by RAs.

In the paper, Sebi has also suggested directions to provide clarity for trading-call providers.

As the paper notes, trading calls are being provided both by IAs and RAs.

Therefore, it has segregated which trading calls would fall under the purview of IA Regulations and which would fall under that of RA Regulations.

The paper has suggested that, if the call is provided after the risk profiling of the client and product suitability assessment, such calls are on “one to one” basis and will  come under the purview of IA Regulations. On the other hand, if the call is provided without any risk profiling of the client and product suitability assessment, such trading calls are on “one to many” basis and will come under the purview of RA Regulations.