Exchange's subsidiary can administer, supervise investment advisers: Sebi

Amid growing number of registered investment advisers, markets regulator Sebi on Thursday said a wholly-owned subsidiary of a stock exchange can administer and supervise such advisers.

Besides, the regulator put in place the criteria for grant of recognition to a stock exchange's subsidiary and its responsibilities.

"Considering the growing number of registered Investment Advisers (IAs)...it is decided to recognize a wholly-owned subsidiary of the stock exchange (stock exchange subsidiary) to administer and supervise IAs registered with Sebi," the regulator said in a circular.

Under IA Regulations, Sebi can recognise any body or body corporate for the purpose of regulating IAs.

It further provides that Sebi may, at the time of recognition of such body, delegate administration and supervision of IAs to such body or body corporate on certain terms and conditions.

Sebi said the recognition of stock exchange's subsidiary will be based on eligibility of parent entity.

The parent entity should be in existence for a minimum of 15 years, should have a minimum net worth of Rs 200 crore, should have nation-wide terminals as well as investor grievance redressal mechanism, including arbitration, the circular said.

Besides, the stock exchange needs to have investor service centres (ISCs) in at least 20 cities.

Sebi said the exchange will either form a subsidiary or designate an existing subsidiary for the purpose of regulating IAs.

The subsidiary will put in place systems for grievance redressal, administrative action against IAs, maintain data, share information with Sebi.

The subsidiary needs to have the necessary infrastructure like adequate office space, equipment and manpower to effectively discharge its responsibilities.

It further said that infrastructure may be shared with other group entities where required.

With regard to responsibilities of a stock exchange's subsidiary, Sebi said they are required to supervise IAs, including both onsite and offsite, redress grievance of clients and IAs, take administrative action including issuing warning and referring to Sebi for enforcement action.

In addition, they will have to monitor activities of IAs by obtaining periodical reports, submit such reports to Sebi and maintain database of IAs.

The stock exchanges fulfilling these criteria may submit detailed proposal incorporating requisite systems and mechanism to discharge responsibilities to Sebi within 30 days, it said.

In 2016, the markets watchdog had allowed registered IAs to use infrastructure of stock exchanges to purchase and redeem mutual fund units directly from asset management companies on behalf of their clients.