Last Updated on August 30, 2021 at 9:08 am
Readers may be aware of SEBI’s proposed changes in investment advisor regulations and my request to readers to oppose them: Is SEBI trying to harm investors’ interests & destroy fee-only advisory? In a landmark move taken at their board meeting, SEBI has announced several big benefits for investors! Thank you to all readers for their emails and suggestions to SEBI!
At the time of writing it is not yet clear about changes to net worth requirement and qualifications for individual registered investment advisors (RIAs). We shall report on that as and when the full circular becomes available. The following are the benefits announced today for investors:
1: Segregation of Advisory & Distribution Activities at client level to avoid conflict of
interest. Further, Individual Investment Adviser shall not provide distribution
services
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What this means: Corporate RIAs cannot offer investment advice and commission-based products to the same client. Individual RIAs cannot provide distribution at all. This is a welcome move to usher in an era of true fiduciary (best interest of clients at all times) at least among individual RIAs.
2: Implementation services (Execution) through direct schemes/ products in the
securities market shall be allowed to Investment Advisers for the convenience of
the investors.
What this means: RIAs can implement KYC for clients and suggest investments in direct plans. Earlier only distributors and RTAs could do KYC. Now RIAs can do this as well. Will benefit investors.
3: To mandate an agreement between Investment Adviser and the client
incorporating the key terms and conditions regarding Investment Advisory
Services for greater transparency
What this means: Clients can decide what forms of communication with the advisor will be recorded. If they do not want phone calls and video conferencing to be recorded then they can say so.
4: Person dealing in the distribution of securities shall not use the nomenclature
“Independent Financial Adviser (IFA)” or “Wealth Adviser” or any other similar
name, unless registered with SEBI as Investment Adviser
What this means: Distributors are not investment advisors! Regular readers may know that I have been fighting for this for a very long time! See: MF AMCs disregard SEBI Advisor regulations!
This is a welcome move by SEBI and will immensely benefit investors. Thank you for writing to them. Also, see: