The Securities and Exchange Board of India (SEBI) has introduced a consultation paper proposing major regulatory relaxations for investment advisors (IAs) and research analysts (RAs). This initiative is designed to streamline the registration process, curb the influence of unregulated financial influencers, and enhance transparency within the financial advisory sector.
Easing Registration Requirements
One of the key changes proposed by SEBI is the reduction in qualification requirements for IAs and RAs. Previously, individuals were required to have a post-graduate degree; the new proposal lowers this to a graduate degree. Additionally, SEBI plans to eliminate the mandatory minimum net worth criteria and remove experience requirements, making it easier for professionals to enter the industry.
Introduction of a Digital Platform
SEBI aims to introduce a digital platform to enhance transparency and streamline the interaction between investors and registered advisors. This platform will help investors easily identify registered advisors, facilitate smoother transactions, and provide a more transparent and efficient system for advisory services.
Regulating Financial Influencers
The rise of unregistered financial influencers, or “finfluencers,” has prompted SEBI to take action. The regulator’s new measures include tighter controls on collaborations between registered entities and unregistered individuals, which have been a significant source of concern. These changes aim to bring more financial influencers under regulatory oversight, ensuring that investors receive advice from credible sources.
Simplifying Compliance for Advisors
Currently, RIAs are required to pass two exams every three years to maintain their registration. SEBI’s proposed changes aim to ease these compliance burdens, making it less onerous for advisors to continue their practice. This move is expected to increase the number of active registered advisors and reduce the prevalence of unregistered advice, which can often lead to misinformation and financial loss for investors.
New Guidelines for Research Analysts
For research analysts, SEBI has proposed a clear distinction between trading calls based on client risk profiling and those made without such assessments. This differentiation will help in setting more precise guidelines and ensuring that research services are tailored to client needs appropriately. Additionally, SEBI plans to establish a framework for model portfolio recommendations, enhancing the overall quality and reliability of research services provided to investors.
Stakeholder Feedback
SEBI has invited public comments on these proposals until August 26, 2024. This open consultation process allows stakeholders, including investors, advisors, and analysts, to provide their input and help shape the final regulatory framework. This collaborative approach underscores SEBI’s commitment to creating a more inclusive and well-regulated financial advisory environment.
These proposed changes by SEBI represent a significant shift in the regulatory landscape for investment advisors and research analysts in India. By reducing entry barriers, enhancing transparency, and curbing the influence of unregulated actors, SEBI aims to create a more robust and reliable financial advisory sector.
Meet Suhas Harshe, a financial advisor committed to assisting people and businesses in confidently understanding and managing the complexities of the financial world. Suhas has shared his knowledge on various topics like business, investment strategies, optimizing taxes, and promoting financial well-being through articles in InvestmentDose.com
