Banks and Non-Banking Financial Companies (NBFCs) planning to provide investment advisory services have to obtain approvals from both the RBI and the Sebi.
“A bank or an NBFC which proposes to undertake investment advisory services has to first obtain permission by Reserve Bank of India and then shall make an application for grant of registration…through an subsidiary or separately identifiable department or division (SIDD),” Securities and Exchange Board of India (Sebi) said in a public communication.
An investment adviser provides advice related to dealings in securities or investment products.
Any entity which willing to engage in the business of providing investment advice to clients or other persons or group of persons is required to get registration from the Sebi.
In 2013, Sebi had notified norms that made it mandatory for investment advisers to register with the capital market regulator and also require them to disclose all issues that could result in conflict of interests, among others.
The norms require investment advisers, banks, NBFCs and corporates would have to segregate their investment advisory services from other activities.
“Investment advisers which are banks, NBFCs and body corporate providing distribution or execution services also to their clients shall keep such activities segregated from investment advisory activities,” Sebi said.
“The investment advisory service has to provided by a separately identifiable department or division (SIDD) or a subsidiary, as the case may be and such SIDD or subsidiary shall include the words ‘investment adviser’ in its name,” it added.
The Sebi also said, an individual registered as an investment adviser as well as its partners as well as representatives who are rendering investment advice have to fulfil with the minimum qualification and certification requirements.
Investment advisers who were engaged in providing investment advice before the notification of the norms in 2013 have time till April 20, 2015 to obtain necessary certification.
