To ease your burden, we have come up with a detailed analysis of the amendments to IA regulation by SEBI (Investment Advisers) (Amendment) Regulations, 2020, so that in spite of googling for the same, you may get all your answers at once.
These amendments would be applicable from October 01, 2020.
Following are the key amendments:
Qualification and certification requirements:
“Persons associated with investment advice” shall mean any member, partner, officer, director or employee or any sales staff of such investment adviser including any person occupying a similar status or performing a similar function irrespective of the nature of association with the investment adviser who is engaged in providing investment advisory services to the clients of the investment adviser.
For individuals RIA, he along with all persons associated with investment advice would require to comply with qualification and certification requirements. The enhanced qualification and experience requirements are to be complied with within three years.
Net-worth/ net tangible assets requirements:
Partnership firms has been re-categorised as “non-individuals”. This has increased the earlier networth requirement for them to Fifty Lakhs.
Please note that for existing RIAs, the enhanced requirements are to be complied with, within three years.
Individual RIAs with more than 150 clients: Individuals RIAs with more than 150 clients shall apply for registration as non-individual investment adviser within such time as may be specified by the Board. Timeline for the same is not defined; a circular with respect to the same is awaited.
Fees: The fee charged by the Investment Adviser for providing Investment Advice from a client shall be in the manner as specified by SEBI; a circular with respect to the same is awaited. Definition of “assets under advice” is inserted. This is probably with a view to introduce as a part of Assets under advice (AUA) mechanism of fees.
Agreement between Investment Adviser and client: Client agreement has been made mandatory for ensuring greater transparency with reference to advisory activities. A circular with respect to minimum mandatory terms to be incorporated in agreement is awaited.
Audit Compliance Report: Audit Compliance Report is now to be submitted to SEBI. A circular with respect to timeline of the same is awaited. The change in annual compliance audit requirement is very critical as this is the only report as on date submission of which has been made mandatory for a RIA.
Client level segregation of advisory and distribution activities;
‘Group’ for this purpose shall mean an entity which is a holding, subsidiary, associate, subsidiary of a holding company to which it is also a subsidiary or an investing company or the venturer of the company as per the provisions of Companies Act, 2013 for non-individual investment adviser which is a company under the said Act and in any other case, an entity which has a controlling interest or is subject to the controlling interest of a non-individual investment adviser.
Implementation of advice or execution:
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