Who must register as an investment adviser?
A person who, for consideration, is engaged in the business of providing investment advice must register with SEBI before acting as an investment adviser. Investment advice is advice on buying, selling, or otherwise dealing in securities or investment products, including financial planning that contains that advice. A registration number on the SEBI list is the result of that registration. It is not the test of who must apply.
Who is an investment adviser?
The definition includes a person who holds himself or herself out as an investment adviser, by whatever name. The advice may be written, oral, or through any other means. Advice that relates only to a market which is not the securities market, and which another regulator already registers, is outside these regulations.
The individual adviser, or the principal officer of a non-individual adviser, has to meet the qualification and the experience the regulations prescribe. A change in control of a registered adviser needs SEBI’s prior approval.
Who is outside the registration?
General comments, made in good faith, about trends in the securities market or the economy are not investment advice. Advice published in a newspaper, a magazine, or another medium that is widely available to the public is not investment advice for these regulations.
Advice that is solely incidental to another activity is also outside, for that activity. That covers an insurance agent or broker, a pension adviser, a mutual-fund distributor, a stock broker, a portfolio manager, a merchant banker, and a fund manager, each acting inside the registration that person already holds. It also covers a lawyer, a chartered accountant, a company secretary, or a cost accountant whose advice is incidental to that practice. Holding the qualification is not itself an exemption. A separate business of advising clients on securities is a business that needs this registration.
Advice given only to clients outside India, who are not non-resident Indians or overseas citizens of India, is outside the registration.
What duties follow registration?
The adviser acts in a fiduciary capacity and discloses conflicts. The adviser is paid by the client and does not take remuneration from another person for the advice. Advisory activity and any other activity stay at arm’s length. The adviser does not, knowingly, sell securities to a client or buy securities from a client on the adviser’s own account, and does not deal on the adviser’s own account contrary to advice given to clients for fifteen days from that advice.
A client grievance is redressed within twenty-one calendar days of receipt. SEBI has recognised BSE Administration and Supervision Limited as the body for administration and supervision of investment advisers. The adviser also follows the know-your-client process SEBI specifies, and enters a written agreement with the client.
When does an individual become a non-individual?
An individual investment adviser whose clients exceed 150 in total has to apply for registration as a non-individual. The limit is a registration condition. It is not a permission to advise 150 people without being registered.
Frequently asked questions
Four questions cover a published column, a professional qualification, a product commission, and a portfolio manager.
Does a newspaper column need this registration?
No. Advice given through a newspaper, a magazine, or another medium that is widely available to the public is not investment advice for these regulations.
Is every chartered accountant exempt?
No. A professional qualification does not by itself exempt the person. Advice that is only incidental to an already regulated practice can be outside. A separate business of advising on securities is not incidental.
Can the adviser take a commission from the product?
No. The adviser is paid by the client. Consideration from a person other than the client, for the advice, is not permitted.
Is a portfolio manager the same registration?
No. A portfolio manager is registered under the portfolio-manager regulations. That registration does not by itself authorise a separate investment-advisory business.
Sources
Registration is under the SEBI (Investment Advisers) Regulations, 2013. Administration of registered advisers is with the body SEBI has recognised for that purpose.