The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
Amendment-The Investor Advisers are regulated by the Securities Exchange Board of India under the SEBI (Investment Adviser Regulations) 2013 (“IA Regulation”). The IA Regulation broadly comprises the various aspects relating to investment advisers such as their qualification, registration, certification, risk profiling, code of conduct, inspection, and
manner of conduction of inspection. The investment advisors(“IA”)[1]largely provide advisory, distribution, and execution services.
However, in recent years, SEBI has received complaints from several investors regarding the malpractices conducted by the investment advisors such as levying excess fees, non-disclosures of complete fees/services, false promises with respect to returns, etc. Therefore, to strengthen the existing regulation and provide better safeguards to
the rights of the investors, SEBI issued three consultation papers for public comments. Subsequently, SEBI constituted a Working Committee and submitted its report on 2020[2], for public comments, wherein segregation of advisory, distribution, and execution in the services of the investors’ advisors was suggested by SEBI, with an aim to reduce the conflict of interest arising due to multiple services.
Based on the comments received on the report submitted by the Working Committee, SEBI vides its gazette notification dated 03 July 2020, notified
the Amendment of SEBI (Investment Advisers) (Amendment) Regulations, 2020.[3] This article provides an overview of the key changes brought in the IA regulations through this amendment by SEBI.
Contents hide
1 Client Level Segregation of Advisory and Distribution Services
2 Implementation of Advice or Execution
3 Changes in the qualification requirements
Under the Amendment, Regulation 22 has been substituted to provide a client-level segregation in advisory and
distribution services in order to avoid any conflict of interest. The following conditions have been laid down under the new Regulation:
Therefore, the Amendment clarifies that a client shall not be provided with both advisory and distribution services
by an individual IA or within the same group of non-individual IA. It provides for a clear segregation between advisory and distribution services. Accordingly, an IA can either provide advisory or distribution services.
A new Regulation 22(A) has been inserted under the Amendment. As per Regulation 22(A), an IA shall provide implementation services in securities to the clients, however the same should be provided without any consideration (which includes any commissions or referral fee) whether embedded directly or indirectly or
received in whatever name, as the case may be. The client shall not be under any obligation to avail of implementation services provided by an IA.
Presently, the following qualifications are required from an IA, partners/representative[6] of an IA under Regulation 7:
designated director or managing partner or executive chairman of the board
or equivalent management body who is responsible for the overall function of the business and
operations of a non-individual investment adviser.
The following conditions are imposed with respect to the Net Worth of an IA under the new Amendment.
It is pertinent to note here that, an existing IA shall comply with the aforementioned requirements within 3 years from date of the
commencement of the Amendment Regulations.
Considering the complaints received by SEBI from the investors with respect to the exorbitant fee charge by IA’s, the Working Committee had proposed a fee of 2.25% of the assets under management or an absolute amount of Rs 75,000 per annum, thereby providing for a fix fee structure to be complie with by the IA. However, the same has not been notified by SEBI under the new amendment, although, as per the new amendment, the fee shall be charged by the IA
as prescribed by SEBI.
The Amendment seeks to address all the issues faced by an investor while availing the advisory/distribution/execution services from an IA. The amendment aims to strengthen the existing regulation and provide better protection to the rights of the investors by imposing strict and specific conditions on the IA. Accordingly, IA’s should ensure the compliances under the Regulation such as the net worth and qualifications of its personnel. Further, vide its press release dated July 03, 2020, SEBI has clarified that the guidelines dealing with various other issues like key terms and conditions of investment advisory services agreement, modes of charging fee, periodicity etc. will be
separately specified through a circular.
[1] SEBI (Investment Advisers) (Amendment) Regulations, 2020 Section 2(m)
[2] SEBIConsultation Paper on Review of Regulatory Framework for Investment Advisers dated January 15, 2020
[3] sebi(Investment Advisers) (Amendment) Regulations, 2020 dated on July 03, 2020
[4] SEBI (Investment Advisers) (Amendment) Regulations, 2020 Section (2) cl. 1 (gc)
[5] sebi(Investment Advisers) (Amendment) Regulations, 2020 Section (2) cl. 1 (pa)
[6] “Representatives” is define as an employee or an agent of an IA
who renders investment services on behalf of an IA
[7] Has been rename from “Capital adequacy” to “Net Worth”
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