New Delhi: The Securities and Exchange Board of India (SEBI) on Thursday proposed significant changes to ease the eligibility and operational norms for Investment Advisers (IAs) and Research Analysts (RAs). Among the key proposals is the relaxation of educational qualification requirements, allowing graduates from any discipline to apply for registration.
However, SEBI emphasized that passing the NISM certification exam would remain mandatory to ensure applicants possess adequate domain knowledge and professional competence. Currently, only those holding graduate or postgraduate degrees in finance-related fields—such as Finance, Business Management, Commerce, Economics, or Capital Markets—are eligible to register.
Sharing of Past Performance Data
SEBI has also proposed permitting IAs and RAs to share past performance data that predates their association with the Past Risk and Return Verification Agency (PaRRVA), but only if specifically requested by a client. This data must be certified by a Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant (CMA), and cannot be shared on public platforms like websites or social media. Additionally, it must carry a disclaimer noting that the information has not been verified by PaRRVA.
This provision will be valid for two years after PaRRVA becomes operational, after which sharing such historical data will be disallowed. Under the current rules, IAs and RAs are barred from disclosing any performance data prior to their onboarding with PaRRVA.
Fee Structure and Second Opinions
In a move to increase flexibility, SEBI has suggested allowing IAs to provide second opinions on investments made under existing distribution arrangements. Further, they may be permitted to charge advisory fees based on Assets Under Advice (AUA), capped at 2.5% annually.
For this model, IAs must obtain annual client consent and clearly disclose that distributor commissions also apply to these assets. Presently, IAs using the AUA-based fee model are not allowed to include assets acquired through other distributors.
Simplifying Corporatization Requirements
SEBI has also proposed easing the transition process for individual IAs seeking corporatization. Once an IA crosses the threshold of 300 clients or Rs 3 crore in fees, they must notify SEBI and initiate the transition to a non-individual entity.
The transition timeline includes three months to apply for in-principle approval, followed by another three months to complete the conversion. During this six-month period, IAs may continue onboarding new clients and charging fees. Currently, the transition must be completed within three months of exceeding the client or fee limit.
Eased Registration and Documentation Norms
To streamline compliance, SEBI recommended removing the requirement to submit a CIBIL credit report as part of the application. Additionally, applicants would no longer need to provide net worth certificates, asset-liability statements, income tax returns, or address proof.
Instead, address details can be provided through self-declaration, with mandatory submission of identity proof and OTP-based verification to maintain due diligence standards.
