In its new set of rules for the estimated $1-trillion wealth management industry, market regulator Sebi is mulling a model where the wealth managers regulate themselves.
The Securities and Exchanges Board of India (SEBI) is planning to set up an intermediary regulatory body with representation from among the wealth managers themselves. In the proposed self-regulatory model, the market watchdog will put the onus of complying with regulations entirely on the wealth managers.
The new entity to be created under Sebi’s guidance would work as the first-stage regulator as also market development authority, a senior official of the market regulator said.
The decision to set up a self-regulatory organisation for wealth managers has been taken with a twin objective of regulating them without hampering growth prospects, he added.
The wealth managers or investment advisors would be asked to develop a stringent code of conduct in consultation with Sebi, which would be complemented with stern penalty measures for erring entities.
Sebi would provide an initial funding of Rs 10 crore for setting up of this SRO for wealth managers, after which the industry would have to pool in their own resources.
The proposed move is in line with similar measures earlier taken for mutual funds and merchant bankers, whose industry bodies AMFI (Association of Mutual Funds in India) and AMBI (Association of Merchant Bankers in India) serve as first-stage regulators.
While RBI and Sebi would be primarily responsible for compliance of the rules, help would be sought from other regulators, namely commodity regulator FMC, insurance watchdog IRDA and pension fund regulator PFRDA, whenever needed.