SEBI pushes for corporatisation of investment advisory

Madhabi Puri Buch

Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch on October 4 again pushed for the corporatisation of investment advisories amid pushback from Registered Investment Advisers (RIAs).

In July 202o, the market regulator said that individual investment advisers with more than 150 clients need to apply for a corporate licence.

Speaking at the Association of Registered Investment Advisers (ARIA) conference, Buch talked about how individual investment advisers running a big business with non-registered people increased the risk of spreading poor advice to investors.

"SEBI officers have seen with their own eyes that one investment adviser with one registration running a 500-people call centre, a full-fledged business. I don't know how many people they drove to suicide,” Buch said.

She asked the RIAs what the problem was in corporatising when they were running such big businesses.

Harsh Roongta, director of ARIA and head of Fee Only Investment Advisors, said about 67 percent of IAs were individuals. Individuals were the lifeblood of any business as they have the energy and drive to go through every nook and corner in the country, he said.

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Buch also added that corporatisation would give an additional layer of investor protection.

"When there is a board, compliance head, certain minimum net worth, it will bring seriousness and governance to an entity. The seriousness that comes with the corporate structure adds a layer of investor protection than a single person acting,” she said.