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Investment advisers need to have good credit report for offering services

Investment advisers would be required to submit a credit report or credit score from CIBIL, instead of references from two bankers needed in the original draft regulations, while applying for SEBI registration

 
New Delhi: Investment advisers will need to have a good credit report card and satisfactory research capacity to get permission to provide advice to investors in stocks and other capital market segments, reports PTI.
 
Market regulator Securities and Exchange Board of India (SEBI) recently decided to frame exclusive regulations for Investment Advisers, after consulting other regulators like Reserve Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA) and Pension Fund Regulatory and Development Authority-PFRDA (PFRDA), as also the comments received from the public on a concept paper disseminated for this purpose.
 
After deliberations over the proposed rules at its board meeting, the SEBI board felt that the regulations need to robust enough to safeguard the interest of investors in the capital markets, a senior official said.
 
Accordingly, a number of changes were suggested by the board to the draft regulations proposed by SEBI, including the requirement of a credit report or score from Credit Information Bureau (India) Ltd (CIBIL), and details of the research facility to be submitted by the entities seeking to become investment advisers, he added.
 
While the draft regulations were presented before SEBI board in August, the final regulations would be notified soon after incorporating the proposed changes.
 
Also, the new regulations, which make it mandatory for investment advisers to get registered with SEBI subject to certain exceptions, would now come into force three months after their notification.
 
SEBI had previously proposed the regulations to become effective from the date of their notification.
 
Among the proposed changes, the investment advisers in their applications would be required to submit a credit report / score from the CIBIL, instead of references from two bankers needed in the original draft regulations.
 
CIBIL is a national agency that collects and maintains records of an individual's payments pertaining to loans and credit cards.
 
This information is used to create credit information reports (CIR) and credit scores which are provided to lenders and other entities to help them evaluate the credit profile of the person.
 
Also, the draft regulations required the entities seeking to get registered as investment advisers to submit details of their data processing capacity. Instead, they would now be required to submit details of their in-house and other research capabilities, the official said. .
 
The other changes to the draft regulations include the provision for appointing or authorising an Ombudsman to resolve any dispute between the investment advisers and his/her clients, in addition to a dispute resolution mechanism through arbitration.
 
Besides, the draft regulations provided for SEBI being authorised to appoint an self regulatory organisation (SRO) for the purpose of regulating Investment Advisers at a later stage.
 
However, this has now been proposed to be replaced by a provision, under which SEBI for the purpose of regulating investment advisers may recognise a "body constituted under appropriate laws/regulations", whose membership will be necessary for being allowed to act as an investment adviser.
 
Changes have also been proposed to make it clear in the regulations that the education and certification requirements for the investment advisers are continual in nature.
 
As per the proposed regulations, the investment advisers would not be allowed to take any remuneration or compensation from any person other than from the client being advised.
 
For a bank or body corporate having a distribution, referral or execution business, it would be necessary to keep the investment advisory services segregated from such activities and to make disclosures to the clients being advised about any remuneration or compensation received by it and any of its associates for the distribution, referral or execution services.
 

User

COMMENTS

MOHAN

4 years ago

I have paid my broker an amount of Rs.1800/- for investment "tips" for cash segment for six months at a 50% discount ! ! . I am regularly getting tips through SMS. But, it is not disclosed whether the SMS for buy and sell is based on fundamentals or technicals. SEBI must make it mandatory for the providers of such investment "ideas" to include the details of fundaments/technicals along with the buying/selling recommendations. Simply advising the clients for buy and sell of a stock must be made illegal because the information could be an insider information or pure speculation or cheating.

REPLY

Nilesh KAMERKAR

In Reply to MOHAN 4 years ago

Sir,

Please permit me to say . . .If profits can be made @ Rs.1800 for six months where’s the need to work and earn?


Whose fault??? When you act recklessly and end up with a financial disaster. If people confuse speculation with investing, what can SEBI do about it? No regulator can control a market participant’s greed to make a quick buck by entering into a perfectly legal but loss making transaction.


Speculation is not illegal, cheating is. If you speculate you must do it with your eyes open and with a clear understanding that you might eventually end up wiping out your entire capital. Speculation is mostly about betting on an outcome within a stipulated timeframe, normally of shorter duration. But, in the long run the speculators normally lose - there can be a few exceptions though (say top 5% of the speculators) to prove the rule.


Look before you leap …

MOHAN

In Reply to Nilesh KAMERKAR 4 years ago

You are absolutely right. I have not done any single transaction so far based on the "1800" advice. My point is that the "adviser" must explain/disclose the basis for the investment 'advise".

Nilesh KAMERKAR

In Reply to MOHAN 4 years ago

There’s no need to find out whether these ‘tips’ are based on fundamentals or technical’s. The only step you need to take is to run as fast as possible away from such tipsters.

Sir, the rationale is simple, why would any ‘right minded’ person exchange such potent trading / investment ideas for a princely sum of Rs.300 per month? – Would he not seek a profit-sharing arrangement?

It would be a horrible mistake to call such a tipster as an investment adviser. Because, what is being dispensed, is not ‘investment advice’, but, may be an encouragement to bet on the odds – similar to what a casino dealer does at his gambling table.

SEBI to sign MoUs with seven countries to attract foreign investors

 

SEBI has decided to sign MoUs with six countries Argentina, Turkey, Kuwait, Qatar, Ireland and Latvia to attract foreign investors to Indian stock market
 
New Delhi: With an aim to attract foreign investors from a larger number countries to the Indian capital markets, regulator Securities and Exchange Board of India (SEBI) may soon sign bilateral memorandum of understandings (MoUs) with its counterparts in at least six countries, reports PTI.
 
At the same time, SEBI will request the market regulators across various countries to allow the Indian market intermediaries operating in their jurisdictions to solicit business from interested qualified foreign investors (QFIs) at those places.
 
The steps are being taken by SEBI pursuant to suggestions made by the Ministry of Finance in this regard and would help attract more overseas investments through the QFI route, a senior official said.
 
The QFI framework was first put in place about a year ago and individuals, groups or associations from 45 countries, including Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, Switzerland, UAE, UK and the US, are currently eligible to invest through the QFI route.
 
Foreign investors are allowed to invest directly through QFI route in stocks, mutual funds and corporate bonds through demat accounts opened with SEBI-registered Depository Participants, after meeting KYC (Know Your Client) norms applicable in the Indian markets.
 
However, the absence of an MoU between SEBI and the respective regulators in seven other countries (Argentina, Republic of Korea, Turkey, Kuwait, Qatar, Ireland and Latvia) make the entities in those jurisdictions ineligible to put money as QFIs into the Indian capital markets, the Finance Ministry had informed SEBI.
 
At the same time, certain restrictions imposed by SEBI's counterparts in a number of countries make it difficult for the entities in those jurisdictions to invest in India through the QFI route, the official said.
 
In order to remove these bottlenecks, SEBI has decided to sign MoUs with six countries -- namley Argentina, Turkey, Kuwait, Qatar, Ireland and Latvia.
 
SEBI would also seek to expedite the process in cases where it has already taken initiatives to enter into bilateral MoUs with regulators in other countrries.
 
SEBI is of the view that a bilateral MoU might not be required with its counterpart in Republic of Korea, as it is already a member of international body Financial Action Task Force (FATF) and a signatory to global market regulators' grouping IOSCO's multilateral memorandum of understanding (MMoU).
 
As per the current regulations, those permitted to invest as QFIs include individuals, groups or associations who are resident in a foreign country that is a Member of the FATF or a member of a group which is member of FATF and a Signatory of IOSCO's MoU, or a signatory of a bilateral MoU with SEBI.
 
QFIs do not include entities like FIIs, their sub-accounts and foreign venture capial investors. NRIs are also allowed to invest as QFIs, provided they have closed their demat accounts opened as NRI.
 
Originally, the QFI definition was limited to the 34 member countries of FATF.
 
In response to several enquiries from the Gulf region, the scope of the scheme was expanded in June 2012 to include residents of the member countries of Gulf Co-operation Council (GCC) and European Commission (EC) as these bodies / organisations are members of FATF.
 
With respect to the restrictions imposed by certain jurisdictions towards Indian intermediaries, SEBI has proposed to take up such issues proactively with their respective regulators to make it easier for entities in those countries to invest in India as QFIs.
 
SEBI would request the regulators in such jurisdictions, wherever appropriate, to exempt registered Indian intermediaries from any additional registration requirements for soliciting business from qualified residents in foreign jurisdictions.
 
The move follows concerns raised by market participants in the recent past that certain jurisdictions impose regulatory restrictions on Indian Intermediaries on soliciting investments from their investors, if such intermediaries have not obtained a prior registration with the regulatory authorities of such jurisdiction.
 
Observing that such restrictions pose a significant challenge to the QFI scheme, the Ministry of Finance had suggested that SEBI might take up the matter proactively with the regulators in such jurisdictions.
 
The issues were discussed in the last meeting of SEBI's board, where it was observed that the appropriate steps would be initiated by SEBI Chairman without further approval of the regulator's board.
 

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