Sebi issues fresh consultation papers on Investment Advisers

Markets regulator Sebi today proposed new norms for Investment Advisers, under which they will have to segregate their advisory and product distribution businesses.
However, mutual fund distributors while distributing the investment product can explain its features to the client.
The new proposals would help prevent the conflict of interest between 'advising' and 'selling' of investment products by the same entity or person.
"There should be clear segregation between the two activities of the entity - providing investment advice and distribution of the investment products/ execution of investment transactions," Sebi said in a discussion paper.
The Securities and Exchange Board of India (Sebi) has sought public comments on the fresh proposals till January 23 and the final regulation will be put in place after taking into consideration, views of all the stakeholders.

The regulator had first issued a discussion paper that outlined the road map of distribution and advisory services in October 2016 and a revised consultation paper was issued in June last year.

Under the new proposals, individuals who are willing to get registered as investment advisers will not provide any distribution services in financial products, either directly or through any of their immediate relatives.
Similarly, individuals providing distribution services shall not provide advice for investing in financial product either directly or through their immediate relatives.
"Immediate relative" means a spouse of a person, and includes parent, brother, sister or child of such person or of the spouse.

Existing registered investment advisers who are offering distribution services through immediate relatives or through separate department or through holding or subsidiary or associate company should choose among providing investment advice or the distribution services before March 31, 2019.
"From April 1, 2019, any person, including their immediate relatives or holding/subsidiary/associate entity, shall offer either investment advice or distribution services," the regulator said in the consultation papers.
Sebi said banks, NBFCs, body corporates, LLPs and firms who are willing to get registered as investment advisers, should not provide any distribution services in financial products, either directly or through their holding company or associate company or subsidiary company.

"Similarly, banks, NBFCs, body corporates, LLPs and firms providing distribution services shall not provide investment advice in financial products either directly or through their holding or associates or subsidiary company," it noted.