Investment advisory registration moves at a snail's pace

Less than 300 investment advisers have taken the licence from the capital market regulator Securities and Exchange Board of India (Sebi) in more than two years to provide advisory services related to dealings in securities.

To safeguard investors’ interest, Sebi has made it mandatory for investment advisers, who provide advice related to dealings in securities or investment products, to register themselves and follow its guidelines.

The Sebi Investment Advisers Regulations came into force in January 2013. Since then, only 268 investment advisers have been registered with the capital market watchdog, as per the latest figures available on the Sebi website.

According to Sebi Chairman U K Sinha, the regulator is “very serious” about these guidelines as these are necessary to safeguard the interest of investors.

“Very few investment advisers have got registered so far, but we are very serious about it and towards the next one year and so, we will have more and more investment advisers who are covered under the regulations,” he said over this weekend.

Furthermore, quoting a survey from the National Council of Applied Economic Research (NCAER), Sinha said 67 per cent investors in the country are following an informal advice system while only one-third are taking formal advice.

To change this situation, Sebi came out with Investors Adviser Regulations.

Market experts attributed such a small number of registered investment advisers to the regulation that asked for separating investment advisory services from all other activities such as distribution.

Also, setting up a separate division is a costly affair for an individual seeking to register as an adviser.

Under the norm, any entity willing to engage in the business of providing investment advice to clients or other persons or group of persons is required to get registration from Sebi.

Besides, investment advisers -- banks, non-banking financial companies (NBFCs) and corporates -- need to separate this activity from all others such as distribution under the regulations.

However, a few individuals have been exempted from registration, including those who give general advice in good faith, advocates who advise their clients incidental to legal practice and insurance agents who give investment advice solely on insurance products.

To be an investment adviser, corporate bodies need to have a minimum worth of Rs 25 lakh while the threshold level would be Rs 1 lakh for individuals.