With an aim to weed out unauthorised entities giving advice to investors, market regulator Sebi today said anyone seeking to act as an investment adviser would need to first obtain a certificate of registration for the same. 

As a part of its efforts to make it convenient for genuine entities to get the registration, Sebi has allowed filing applications with its regional and local offices across the country. 

"In terms of the Investment adviser Regulations, no person shall act as an investment adviser unless he has obtained a certificate of registration from the Board or he is specifically exempt," Sebi ( Securities and Exchange Board of India) said in a statement today. 

The regulator said the applicant seeking to act as an investment adviser should make an application to Sebi in a prescribed format along with the necessary supporting documents like details of the investment advice provided. 

The applicant is required to submit the form with a fee of Rs 5,000 by way of bank draft. 

Generally on receipt of application, the applicant would receive a reply from Sebi within one month. 

Sebi has notified Investment Adviser Regulations in January this year. 

As per the regulation, Sebi made it mandatory for investment advisers to register with thecapital market regulator and also require them to disclose all issues that could result in conflict of interests, among others. 

To ensure more transparency, the new regulations require investment advisers -- banks, non-banking financial companies (NBFCs) and corporates -- would have to segregate their investment advisory services from other activities. 

Investment advisers also have to disclose the fee received for their advice on a particular financial product. 

Sebi said all entities engaged in advising on financial products would need to get registered with it. Besides, the investment advisers need to separate this activity from all other activities such as distribution. 

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. 

A time period of one year has been given for existing investment advisers to comply with necessary capital adequacy requirements. 

In a move to curb the risks related to advisory services, the regulator said the investment adviser cannot enter into transactions on its own account contrary to the advice given to clients for at least 15 days from the day of such advice. 

Advisers must disclose the fee they get for advice on a particular product, their holdings in products on which they are advising, the risks involved and any conflict of interest arising out of their association with issuers of the financial products, according to Sebi notification.

As per Sebi's norm, it is mandatory for investment advisers to maintain all records like know your customer (KYC), risk profiling, suitability sheets, agreement copies, investment advice, whether oral or written, data on fees and time of providing advice for at least five years either in electronic or physical form. 

Entities which are working as advisers have to receive the certification within six months of the rules coming into force. The certification would be valid for five years and has to be renewed three months before the expiry. 

However, Sebi exempted a few individuals from registration including those who give general advice in good faith, like advocates advising their clients on legal matters andinsurance agents giving investment advice solely on insurance products. 

"An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise," as per the notification. 

Existing investment advisers seeking registration under the regulations should ensure their partners and representatives obtain such certification within two years from the date of commencement of these regulations and the same is renewed before the expiry. 

An individual registered as an investment adviser, partner or representative of an investmentadviser registered under these regulations offering investment advice should have professional qualification or post-graduate degree/ diploma in finance, accountancy, business management, commerce, economics, capital market, banking and insurance. 

Alternatively, a graduate in any discipline with an experience of at least five years as an adviser in domains like financial products/securities/fund/asset or portfolio management would also qualify. 

Last year, Sebi had said entities providing paid investment advice to various market players would be regulated. In 2011, Sebi had floated a paper on regulating investment advisers and the same had received good response. (Economic Times)