India is witnessing a huge increase in stock market investments from average retail investors over recent years. These novice investors do not necessarily have sufficient market knowledge and often fall for faulty or unfavourable investment advice from so-called investment advisors. SEBI had been getting many complaints relating to the same and therefore, to address this issue has implemented guidelines for SEBI Registered Investment Advisors. Given here is the meaning of SEBI RIAs and related information on the same.
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SEBI (Securities and Exchange Board of India) registered investment advisors are professionals who have registered with SEBI under the SEBI (Investment Advisers) Regulations, 2013. These advisors provide investment advisory services to clients, including individuals and institutions based on a defined fee structure.
According to these regulations of SEBI, investment advisors are required to meet the specific eligibility criteria and the guidelines in providing investment advice to their clients. The term ‘investment advice’ refers to advice in relation to the buying or selling of securities, financial planning, investment management, retirement planning, tax planning, and estate planning. SEBI registration also assures the investors of unbiased and efficient investment advice to help them create an investment portfolio that meets their specific investment criteria and meets their financial goals at the earliest.
The following are the eligibility criteria set as per SEBI guidelines.
The individual or entity must have a professional degree in finance, accounting, business management, economics, or any other related field. They must also have a postgraduate degree or diploma in finance or a related field, or a minimum of five years of work experience in activities related to the securities market.
The individual must have passed the NISM (National Institute of Securities Markets) Series-X-A: Investment Adviser (Level 1) Examination, or any other examination approved by SEBI as well as NISM-Series-X-B: Investment Adviser (Level 2) certification.
The individual or entity must have a minimum of five years of experience in activities related to the securities markets such as fund management, research analyst, or investment advisory services.
Individuals need to have a minimum net worth of Rs. 5,00,000 while the net worth of partnership firms and companies should be Rs. 50,00,000 as per SEBI guidelines.
Some of the key roles of SEBI Registered Investment Advisors (RIAs) as defined under SEBI guidelines are mentioned hereunder
SEBI RIAs are required to provide personalized investment advice to their clients based on their unique requirements like their financial goals, risk tolerance, and investment preferences. They develop an investment strategy for their clients that is aligned with their objectives and liquidity requirements along with providing an ongoing support to help clients stay on track.
SEBI RIAs are also required to educate clients about the various investment options that are available including the risks involved and their potential returns. Investment advisors also help clients understand the nuances of investing in securities and their market behaviour. This helps them in making informed investment decisions that are instrumental in creating a successful investment portfolio.
Market research and analysis is a crucial part of taking investment decisions and ensuring timely entry and exit from the market. SEBI RIAs conduct research on various investment opportunities and provide clients with up-to-date information on the latest market trends, industry developments, and investment strategies to create an optimum investment portfolio.
SEBI RIAs are also charged with offering portfolio management services to their clients. This helps them in building a well-diversified investment portfolio that is specific to their individual needs and goals. Portfolio Management Services are in the nature of extended investment advisory services which is an ever-developing stream in India with the increasing number of HNIs in the country.
SEBI RIAs are required to comply with all the regulatory requirements prescribed under SEBI (Investment Advisers) Regulations, 2013. These requirements include the maintenance of client confidentiality, avoiding any cases of conflicts of interest, and ensuring adequate transparency in disclosing all fees and charges associated with their services. RIAs should also ensure proper record-keeping for all client transactions and communication, including investment recommendations and decisions, for at least five years. Furthermore, compliance procedures also include that RIAs should ensure all their employees are adequately trained and certified to provide financial advice and services to clients.
SEBI being the regulatory authority of the Indian financial markets has information on all registered advisors on their website. It would be good to verify the credentials of any financial advisor on SEBI’s site before engaging them. You would be happy to know that Fisdom is a SEBI Registered Investment Advisor since 2016.
The purpose of introducing the regulations for SEBI Registered Investment Advisors was to ensure that the investors were not duped by fraudulent investment advisors or firms. The various compliance procedures and eligibility requirements ensure that the interests of the investors are protected and that competent persons are eligible to provide optimum investment advice.
As per the guidelines of SEBI, Registered Investment Advisors can charge a fee of 2.5% of Assets under Advice per annum per family or a fee of Rs 75,000 per annum per family as a flat fee
As per SEBI guidelines, the registration fee to be paid by individuals or partnerships for SEBI RIA registration is Rs. 5,000. For other applicants, the said fees are Rs. 25,000.
Applicants can submit the application to be SEBI RIA at the Head Office or the concerned Regional Office Local Office(LO) of SEBI under the jurisdiction where the registered address of the applicant is located at SEBI.
SEBI regulations require the applicants to submit the new worth certificate as attested by a CA which should include their CA membership number. Moreover, such a net worth certificate should not be more than 6 months old at the time of submitting the application.
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