Becoming a SEBI Registered Investment Advisor in India: A Comprehensive Guide

The Securities and Exchange Board of India (SEBI) has established a detailed framework for the registration and regulation of investment advisers in India under the SEBI (Investment Advisers) Regulations, 2013. This article outlines the eligibility criteria, application process, fees, additional requirements, and key compliance measures for becoming a SEBI registered investment advisor.

Eligibility Criteria

1. Educational Qualifications:
   • Individual: Must be a post-graduate or hold a professional qualification from a recognized university or institution in India or abroad, or a CFA charter from the CFA Institute.
   • Non-Individual (Body Corporate, LLP): Must have a minimum net worth of INR 50 lakhs.
   • Individual: Must have a minimum net worth of INR 5 lakhs.
2. Certification and Experience[1]:
   • Must have relevant NISM Certification.
   • Must have a minimum of 5 years of experience in the related field.
3. Fit and Proper Criteria:
   • The applicant, its partners, principal officer, and persons associated with investment advice must be fit and proper as per Schedule II of the SEBI (Intermediaries) Regulations, 2008.
4. Infrastructure:
   • The applicant must have the necessary infrastructure to effectively discharge the activities of an investment advisor.

Application Process

1. Preparation of Documents:
   • Prepare and submit documents to the Investment Adviser Administration and Supervisory Body (IAASB). Documents include proof of qualification, experience, net worth, and other relevant certifications.
2. Submission of Application:
   • Submit the application along with the required documents to Investment Adviser Administration and Supervisory Body. The IAASB will handle the initial scrutiny of applications.
3. Review and Approval:
   • Investment Adviser Administration and Supervisory Body will review the application and forward it to SEBI for final approval. SEBI retains the core functions of registration and enforcement.

Registration:

• Investment advisers must register with SEBI and comply with the eligibility criteria specified in the regulations.
• Individual investment advisers must apply for registration as non-individual investment advisers upon reaching 150 clients[2]

Fees

• The specific fees for registration include application fees and annual fees associated with maintaining the registration. For precise fee details, refer to the latest SEBI circulars or the Investment Adviser Administration and Supervisory Body guidelines.

Additional Requirements

1. Periodic Reporting:
   • Registered Investment Advisers must submit periodic reports to IAASB as per SEBI’s specifications. The reports are to be submitted half-yearly, ending on September 30 and March 31 of every financial year.
2. Compliance with Code of Conduct:
   • Registered Investment Advisers must comply with the Code of Conduct as specified in the SEBI regulations. This includes acting in a fiduciary capacity, maintaining an arm’s length relationship, disclosing conflicts of interest, and following KYC procedures.
3. Fee Structure:
   • Registered Investment Advisers can charge fees under two modes: Assets under Advice (AUA) mode (maximum 2.5% of AUA per annum per client) or Fixed fee mode (maximum INR 1,25,000 per annum per client).
4. Enlistment with Recognized Bodies:
   • Existing investment advisers are deemed to be enlisted with a recognized body or body corporate from the date of recognition. New applicants must ensure they are enlisted with such a body as part of the registration process.

Key Compliance Requirements

• Client-Level Segregation:
  • Investment advisers must ensure client-level segregation of advisory and distribution activities within their group or family.
• Risk Profiling:
  • Investment advisers must complete a risk profile of the client and obtain the client’s consent on the completed risk profile before providing investment advice.
• Fee Collection:
  • Investment advisers must accept fees strictly by account payee crossed cheques, demand drafts, or direct credit into their bank accounts through NEFT/RTGS/IMPS/UPI. Cash deposits are not allowed.[3]

By following these steps and meeting the specified requirements, you can become a SEBI registered investment advisor in India. Ensure to stay updated with any new regulations or amendments issued by SEBI to maintain compliance.

SEBI (Investment Advisers) Regulations, 2013

The SEBI (Investment Advisers) Regulations, 2013, provide a comprehensive framework for the registration and regulation of investment advisers in India. The regulations have been amended several times, with the latest amendment being on October 09, 2023.

Recent Amendments and Circulars

1. Extension in Timeline for Compliance with Qualification and Experience Requirements:
   • SEBI extended the timeline for compliance with the enhanced qualification and experience requirements under Regulation 7(1) of the SEBI (Investment Advisers) Regulations, 2013, to September 30, 2025.
2. Master Circular for Investment Advisers:
   • SEBI issued a Master Circular on June 15, 2023, which compiles all the existing and applicable circulars issued by SEBI pertaining to investment advisers. This circular serves as a comprehensive guide for compliance requirements.
3. Framework for Administration and Supervision of Investment Advisers:
   • SEBI recognized BSE Administration & Supervision Limited (BASL) as the Investment Adviser Administration and Supervisory Body (IAASB) for a period of three years from June 01, 2021. This body is responsible for the administration and supervision of investment advisers, including grievance redressal and monitoring activities[4].
4. Guidelines for Investment Advisers:
   • SEBI issued guidelines on September 23, 2020, to ensure client-level segregation of advisory and distribution activities, proper risk profiling, and other compliance measures[5].
5. Measures to Strengthen the Conduct of Investment Advisers:
   • SEBI issued a circular on December 27, 2019, to strengthen the conduct of investment advisers. This includes restrictions on free trials, proper risk profiling, and the requirement to receive fees through banking channels only[6].

By adhering to these regulations and guidelines, investment advisers can ensure they remain compliant with SEBI’s standards and provide trustworthy and effective advisory services to their clients.

[1] Extension in timeline for compliance with qualification and experience requirements under Regulation 7(1) of SEBI (Investment Advisers) Regulations, 2013  

Circular No.: SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/168 October 10, 2023

[2] Master Circular for Investment Advisers- Jun 15, 2023- SEBI/HO/MIRSD-PoD-2/P/CIR/2023/89

[3]  Circular No.: SEBI/HO/IMD/DF1/CIR/P/2019/169

[4] Framework for administration and supervision of Investment Adviser under the SEBI (Investment Advisers) Regulations, 2013- Jun 18, 2021| Circular No.: SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/579

[5] Guidelines for Investment Advisers- Sep 23, 2020 Circular No.: SEBI/HO/IMD/DF1/CIR/P/2020/182

[6] Circular No.: SEBI/HO/IMD/DF1/CIR/P/2019/169

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