Sebi clarifies on applicability of investment adviser norms

Investment adviser norms will not be applicable to a market participant who is just introducing high networth individuals to possible investment opportunities in the US, according to Sebi.
Providing an informal guidance in this regard to a stock broker, markets regulator Sebi indicated that its views might be different for different conditions.
The guidance has been given to FRR Shares & Securities -- which is registered as a stock broker, depository participant and research analyst. It had sought clarity on whether investment advisers norms would be applicable in the case of introducing high networth individuals to third-party investment vehicles under EB-5 programme of the US.

Under the EB-5 programme, aimed at attracting investments from foreign nationals, high networth individuals can also invest through Regional Centres (RCs).
RC is a third party investment vehicle that assumes responsibility of creating requisite jobs under EB-5 programme in the US.
According to FRR, it had received a business proposal from certain RCs for introducing high networth individuals to them who may be interested in the EB-5 programme.

Besides, FRR had submitted that its role is restricted to introducing such clients to RCs who would be visiting India.
After looking into the submissions, Sebi said since FRR does not propose to provide any kind of investment advice to the clients for consideration, its proposed activity in respect of introducing high networth individuals to RCs does not fall within the ambit of investment advisers norms.

Since the proposed activities of FRR do not pertain to issue management and though advisory do not pertain to Indian markets, the activity may not fall within the ambit of the merchant bankers regulations, the regulator said.