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SEBI tightens norms for investment advisory services, unveils 'regulatory sandbox'

Securities and Exchange Board of India (SEBI) today announced a number of steps to regulate financial markets.

February 17, 2020 / 05:53 PM IST

Securities and Exchange Board of India (SEBI) today announced a number of steps to regulate financial markets, including asking investment advisors and distributors of financial products to segregate their services.

The regulator approved changes to the law under which investment advisory firms, who advise clients on buying and selling of various financial products such as stocks or mutual funds, will have to segregate their services from distribution.

Fees for such services will also be streamlined.

SEBI will also introduce enhanced eligibility criteria for registration as an investment advisor including for networth qualification and experience. There will be a provision for grandfathering existing individual advisers.

Pure-play distributors such as bank relationship managers etc whose job is to help execute such transactions will not be allowed to call themselves “financial advisors” or “wealth manager” unless they are registered with SEBI as investment advisors.


The new rules framed, after considering four consultation papers and public comments, are also aimed at bringing clarity in payment of fees and introduction of upper limit on fees charged to investors, SEBI said.

The last consultation paper was floated for public comments in January.

SEBI also approved a ‘regulatory sandbox’ through which innovative products can be launched for firms within a controlled environment.

The regulator announced a slew of changes to operations of mutual funds, saying it would tweak the categorisation of fund categories, as demanded by fund houses. Further, with a view to promoting skin in the game, it asked fund houses to invest in their closed-end schemes.

Among other announcements, SEBI said it would allow non-bank custodians to hold gold-related instruments.

On the issue of Karvy, SEBI said the broker, which defaulted on its obligations after making losses on illegally acquired client securities, will clear its dues by March.
Moneycontrol News
first published: Feb 17, 2020 05:50 pm
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