Markets regulator SEBI on Thursday proposed easing the educational qualification criteria for Investment Advisers and Research Analysts, allowing graduates from any discipline to apply for registration. However, passing the NISM certification exam will remain mandatory to ensure domain knowledge and professional preparedness, SEBI said in its consultation paper.
Currently, applicants are required to hold a graduate or postgraduate degree in finance-related fields such as Finance, Business Management, Commerce, Economics, or Capital Markets to be eligible for registration.
Also, SEBI proposed allowing IAs and RAs to share past performance data, prior to an entity's association with verification platform Past Risk and Return Verification Agency, only upon specific client request.
This data should be certified by a Chartered Accountant, Company Secretary, or Cost Accountant, and should not be published on public platforms such as websites or social media. A disclaimer should accompany the data, stating that it has not been verified by PaRRVA.
After two years from PaRRVA's operational launch, use of such past data will no longer be permitted.
At present, IAs and RAs are prohibited from sharing any past performance data that predates their onboarding with PaRRVA.
Additionally, SEBI suggested permitting IAs to provide second opinions on assets purchased under existing distribution arrangements and to charge advisory fees based on Assets Under Advice up to 2.5% of such assets annually.
IAs will be required to obtain annual consent from clients and clearly disclose that distributor commissions are also applicable on these assets.
Currently, IAs charging fees based on AUA are not allowed to include assets acquired through other distributors in their AUA calculations.
On easing the corporatization process for individual IAs, SEBI proposed that once an IA crosses the threshold of 300 clients or Rs 3 crore in fees, it should immediately notify the regulator and initiate the transition process.
The IA would then have three months to apply for in-principle approval and an additional three months to complete the conversion to a non-individual entity. During this transition period, the IA should be allowed to onboard new clients and continue collecting fees, SEBI suggested.
Under the current framework, an individual IA is required to complete the transition to a corporate structure within three months after crossing the prescribed client or fee limits.
Also, SEBI recommended removing the requirement to submit a CIBIL credit report as part of the application process. This step is intended to simplify compliance without compromising the regulator's due diligence process.
SEBI further proposed eliminating the requirement to submit net worth certificates, asset-liability statements, income tax returns, and proof of address during the registration process. Applicants will instead be allowed to declare their address on a self-declaration basis while continuing to submit identity proof and undergo OTP-based verification.
The Securities and Exchange Board of India has sought public comments till Aug. 28 on the proposals.
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