Registration must for investment advisers: SEBI draft

Any advice by direct/indirect means thru publications

Mumbai, Oct.10 2007

SEBI has suggested that registration be mandatory for all investment advisers, in its draft
norms. It has framed draft SEBI (Investment Advisers) Regulations, 2007, which is placed in
public domain for comments and suggestions.

According to the norms, a person has to get a certificate to act as an investment adviser. He
also has to be part of a self-regulatory body to receive a certificate under these regulations.
The self-regulatory body needs to forward the application form to the board with its
recommendations.

The board will then grant a certificate upon its discretion. And this certificate will be valid up
until the time the investment advisor is a part of the self-regulatory body.

"Investment adviser means any person who for consideration is engaged in the business of
providing investment advice to others, either directly or through publications or writings or
electronic mails, or who, for consideration and as part of regular business, issues or publishes
reports or analyses containing investment advice and includes any person who holds himself
out as an investment adviser (by whatever name called) to others," says a SEBI draft note.

"An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose
all conflicts of interests as and when they arise or seem likely," the norm further says.

DISCLOSURE NORMS

"An investment adviser shall disclose to a prospective client all material information about
itself, its business, its disciplinary history, the terms and conditions on which it offers
advisory services, its affiliations with other intermediaries and such other information as is
necessary him to take an informed decision on whether to avail himself its services," SEBI
draft paper further said.

The SEBI paper further said that "An investment advisor who contravenes any of the
provisions of the Act, rules or regulations; or contravenes any provision of the bye-laws of the
self-regulatory organisation of which it is a member may be dealt with in the manner provided
under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry
Officer) Regulations, 2002."

Source - http://www.thehindubusinessline.com/2007/10/11/stories/2007101152981601.htm

SEBI working on regulating financial advisors

‘Unregulated financial advice in securities market increasing’
Hyderabad, Aug. 16 2007

The Securities and Exchange Board of India (SEBI) is contemplating the creation of a self-
regulatory mechanism for regulating the financial advisors.

“For a long time, we have been feeling the need for regulating financial advisors. As the
problems due to unregulated financial advice is more in the securities market than in other
sectors, we have taken the lead to put a system in place soon,” Mr M. Damodaram, Chairman,
SEBI told newspersons here on Thursday.
At present, financial advice was being rendered by many agencies such as brokerage and
media houses. “The damage can be severe if this advice is not done in a professional manner,”
he said.

On the nature of the proposed regulator, the SEBI Chairman said the body should be a self
regulatory organisation. “Already some brokerage and media houses have this mechanism in
place. The regulation should be a model code of conduct,” he added.

SEBI had already written to other regulators for their inputs and views on the proposed
regulatory body and “no time frame can be given” for its creation.

Hedge fund norms

On the regulation of hedge funds, Mr Damodaran said there was no norm in the country for
registering hedge funds.

“Globally, there are many categories of hedge funds which are dealt differently in different
countries. We have already regulations for Foreign Institutional Investors (FIIs) but no
separate registration is needed as yet,” he explained.

Some hedge funds approached SEBI for registrations and had been told to look into FII
registration norms to know their category of registration. “The FII norms are on our Web site
and are open for all to see,” he said.

On the impact of sub-prime market meltdown on the US and Indian markets, Mr Damodaran
said it could be one of the reasons for market corrections in India.

“Some global investors could pull out funds from our markets to increase liquidity in the US
market. There could be some correction, but it would be a manageable one. Our markets
continue to be safe,” he explained.

SEBI would be setting up a training institute in the outskirts of Mumbai. “We will soon give a
detailed press release on that,” he said and refused to give further details.

Source - http://www.thehindubusinessline.com/2007/08/17/stories/2007081752111000.htm

SEBI makes registration of Investment Advisors mandatory

Posted October 11th, 2007 by Divesh Sharma

SEBI Stock Markets Featured The Capital Market regulator Securities and Exchange Board
of India (SEBI) has made it mandatory for Investment advisors to register before offering any
advisory services to investors. The investment advisor will get a registration certificate and
then can offer services to clients.

The definition of an investment adviser is a person who, for a consideration, is engaged in the
business of providing investment advice to others, either directly or through publications or
writings or electronic mails, or who, for a consideration and as part of a regular business,
issues or publishes reports or analyses containing investment advice. The term includes any
person who holds himself out as an investment advisor (by whatever name called) to others

However, Apex Regulator has given relaxation to investment adviser, by giving time period of
six months for investment advisors to get registered. Offering advice to some Newspaper,
Journal or Online Source has been exempted from the rule.
At present, a large number of investment advisors are not registered with AMFI or SEBI (The
security watchdog has not offered any registration facility so far), and they are offering advice
for investment in capital market without any contract.

It will be even good for Investment advisors as they will be able to win client trust. Small
investors will be benefitted from the decision of SEBI. Indian Stock markets have seen
tremendous growth in past couple of years and SEBI wants to keep markets secure and free
from any scams.

Source - http://www.topnews.in/sebi-makes-registration-investment-advisors-mandatory-
23409

Sebi plans to make investment advisers registration mandatory

PFW Bureau / Oct 11 2007

Sebi has proposed to make the registration of the investment advisers with the regulator a
must for offering advisory services to the investors. The regulator also wants to make it
mandatory for the investment advisers to be a member of a self-regulatory organisation (SRO)
for getting certification in this regard from Sebi.

In a six-page draft proposal, Sebi said that no person shall act as an investment adviser or
hold himself out as an investment adviser unless he has a certificate from the commencement
of the proposed regulations. But, Sebi said that an investment advisor can continue to offer
the advisory services to the investors for six months from the commencement of this
regulation.

Sebi said that it would be compulsory for the investment advisors to be a member of a SRO
for getting certification from the regulator. The application shall be made to the SRO of which
the applicant is a member and forwarded the same by the SRO to the regulator with its
recommendations. “The certificate shall be valid till the investment adviser continues to be a
member of the SRO on whose recommendation the certificate was granted”, the regulator
said.

Sebi said that an investment adviser shall act in a fiduciary capacity towards its clients and
shall disclose all conflicts of interest. “An investment adviser shall not divulge to anybody
either orally or in writing directly or indirectly any confidential information about its clients
which comes to its knowledge, without taking prior permission of its clients except where
such disclosures are required to be made in compliance with any law”, the regulator said.

Sebi said that stern action will be taken against the erring investment advisors. They may be
dealt with “as per the Sebi (procedure for holding enquiry by enquiry officer) regulations,
2002”.

Sebi has sought the public comments on the proposed draft - Sebi (investment advisers)
regulations, 2007 - on or before October 31, 2007.

Source - http://www.personalfinancewindow.com/regulations/11102007-sebi.htm

Industry welcomes Sebi's proposal on investment advisors

By Indian Express
Saturday October 13, 05:13 AM
Regulation of investment advisors - a proposal that the Securities and Exchange Board of
India (Sebi) had come up with on Wednesday has been welcomed by the industry.
Highlighting the advantages of this proposal, A P Kurien, chairman, Association of Mutual
Funds in India (Amfi) said, "It will bring in better practices in the investment advisory
domain." Ranjit S Mudholkar, chief executive officer, Financial Planning Standards Board
(FPSB), India on the other hand termed it as a consumer-centric move. "The key message is
that investors will be protected by virtue of the fact that advisors will be regulated," he said.

The proposal is also being appreciated by investment advisors too. Rajiv Deep Bajaj,
managing director, Bajaj Capital, the largest mutual funds distributor in the country said, "we
have been advocating this for quite sometime now. Today, anyone can start an advisory
service in India. There needs to be some entry criteria."

If the proposal becomes law, Amfi-registered agents might not have to go for a fresh
registration. "That should be so because they already have undergone the registration process
approved by Sebi," Kurien said.

Under one of the clauses of the proposed regulation, investment advisors will have to disclose
the commission they receive, if an investor acts on the recommended advice. "This is the
practice across the world, and it will bring our market in line with international practices. So,
if it comes as a regulation, I don't mind disclosing it and will comply with the same," Bajaj
said.

While players agree on its utility, they have raised concerns over its effective implementation.
Said financial planner Amar Pandit: "It remains to be seen how many people implement it,
even if it is made mandatory. Also, how will it be ensured that all are following it?"

Sebi has said that self-regulatory organisations (SRO) will be formed under the Sebi
Regulation, 2004, and all advisors will have to be a member of one or more SROs. They will,
in turn, forward their recommendations to the board, which will provide a certificate of
registration. "Self regulation is a broad term and is subjective, which puts a question mark
over compliance," said Pandit. However, Bajaj ascertained that the nature of SROs is not
clear. "We need clarity on who will form the SRO and what will be the criteria to become its
member."