The Securities and Exchange Board of India (SEBI) will enforce a new set of norms to address concerns of "conflict of interests" among firms, investment advisers, portfolio managers and other market intermediaries.
The new norms will be based on a wide range of recommendations that SEBI has received on its concept paper Regulation of Investment Advisors, which it had unveiled in the last of September inviting comments from public.The proposed regulatory framework intends to regulate the activity of providing investment advisory services in various forms by entities including independent financial advisers, banks, distributors and fund managers among others.
While the activity of giving investment advice will be regulated under the proposed framework through a Self Regulatory Organisation (SRO), issues relating to financial products other than securities shall come under the jurisdiction of the respective sectoral regulators such as action for mis-selling and violation of code of conduct.
The SRO set up for the regulation of investment advisers shall follow the rules and regulations laid down by respective regulators for products falling in their jurisdiction, including but not limited to suitability and appropriateness of the products.
The proposed norms are also likely to make it mandatory registration of investment advisers to do away with wealth managers and private bankers to avoid confusion.
"The norms will stipulate that no person can carry on the activity of offering investment advice unless he is registered as an investment adviser under the regulations," said a finance ministry official. "On the other hand any person who has obtained the certificate of registration as an Investment Advisor must necessarily use the word "investment advisor" in his name."
Portfolio managers who provide only investment advice would need to be registered only as investment advisers after their current registration expires.