The Securities and Exchange Board of India (Sebi) approved lowering the eligibility criteria and scrapping the net-worth requirements of investment advisers (IA) and research analysts (RA)in its Board meeting. It also eased the fee regulations for THE. The requirement for postgraduation has been removed, and NISM re-certification will now only be required in parts where major changes have been made. It is unnecessary to write the complete NISM exams again to maintain the certification.
The measures aim to increase the number of registered investment advisers (IAs) and research analysts (RAs) to meet the demands of a rapidly increasing number of domestic investors. This is expected to provide investors with wider access to the services of IAs and RAs, enabling them to make informed investment decisions. Some of the key proposals that got approval are the following.
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Graduation Becomes Minimum Qualification
The minimum qualification requirement is to be reduced to a graduate degree in specified fields. For an individual IA/RA, a graduate degree or a PG degree or PG diploma or professional qualification in a specified field or a PG program from NISM or a professional qualification by obtaining a CFA Charter from the CFA Institute becomes the new minimum qualification.
The specified field shall include finance, accountancy, business management, commerce, economics, capital market, banking, insurance, actuarial science or other financial services or markets.
Further, they should have base certifications such as NISM Series XA and XB for IAs, and NISM-Series-XV for RAs. But this is only necessary initially at the time of registration. Earlier these base certifications had to be obtained afresh subsequently. This re-certification requirement is done away with.
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Experience No Longer Necessary
Experience shall not be required to register as IAs or RAs. Currently, both IAs and RAs require five years of experience in advisory or related firms.
The net-worth requirement shall be replaced with a reduced deposit requirement. IAs and RAs must maintain a deposit of up to one lakh for up to 150 clients. For clients ranging from 150 to 300, 300 to 1,000 clients, and above 1,000 clients, the deposit required is Rs 2 lakh, 5 lakh, and 10 lakh, respectively.
Ease in compliance
Applicants shall be allowed to seek registration as both IA and RA. Applicants (individual/partnership firm) engaged in other business activities and employment (other than related to securities and subject to certain conditions), shall be allowed to seek registration as Part-time IA/ Part-time RA. They shall be required to disclose the nature of other activities and shall ensure that there is no conflict of interest between IA/RA activities and their full-time business activities.
Ease in Fee Collection
IAs are now allowed to change the mode of charging fees (fixed fee mode or AUA-based mode) to clients if the fee is within the relevant threshold. A maximum fee has also been prescribed for RAs from their clients.
The requirement for individual investment advisors (IAs) to corporatize has been relaxed. The new threshold is now 300 clients or fee collection of Rs 3 crore during the financial year, whichever is earlier. This is an increase from the previous threshold of 150 clients.
SEBI clarified that investment advice related to securities under SEBI's purview shall fall under the IA Regulations.
