Become Registered Investment Advisor(RIA)

INVESTMENT ADVISOR REGISTRATION

INTRODUCTION

An investment advisor commonly known as a stockbroker, is a person or group of persons, making recommendations for investors and conducting various securities analysis, through direct management of clients’ assets or written publications and receive their fees in return. Securities and Exchange Board of India introduced a new concept of Investment Adviser Regulations in 2013, which aims at segregating the commission from selling advice on investment. To become an investment advisor, a person is required to get registration with SEBI and the said person cannot receive any kind of remuneration or compensation from any person other than his/her client.

MEANING

An investment advisor performs the duty of a professionals within the financial industry by providing guidance to the clients in exchange for fees. The clients’ interests are what must be preferred by them, as they owe a fiduciary duty towards their clients.

REGISTERED INVESTMENT ADVISOR

It is a person or a firm who provides advisory service to high-net-worth individuals in order to manage their investments and portfolios. Their fundamental obligation is to provide investment advice that acts on the best interest of their clients’. In order to become one, they need to be obtained with the Securities and Exchange Commission’s (SEC) or State Securities Administrators. Their payment is just like that of a mutual fund manager. Generally, they earn their revenue through a management fee which is termed in percentage of the assets held for a client.

ELIGIBILITY OF REGISTERED INVESTMENT ADVISOR

For an individual to get registration as an investment advisor, the following minimum qualifications are required –

1. The person should have a professional qualification, post-graduate degree, postgraduate diploma in finance, business management, accountancy, commerce, capital market, economics, banking, insurance or actuarial science from a university or an institution, recognised by the central or any state government or any foreign university or institution.
2. Or the person must be a graduate in any discipline, having at least five years of experience in activities relating to advice in financial products.
3. Along with this, the person should have certification on financial planning, fund, asset or portfolio management or investment advisory services either from NISM or from any other organisation or institution.
4. The existing investment advisors seeking registration under new regulations should obtain such certification, within two years from the date of commencement of these regulations.
5. Investment advisor in the form of corporate bodies to have net worth of at least Rs 25 lakhs.
6. In case of individual and partnership firms, the condition is to have net tangible assets of at least Rs. I lakh.
7. The registration certificate granted by SEBU is valid for a period of five years from the date of its issuance.

 

DOCUMENTATION REQUIRED REGISTERED INVESTMENT ADVISOR

There are certain documents required to be submitted along with the application of registration with the SEBI. These are –

1. Identity proof of the applicant.
2. Permanent address proof of the applicant.
3. Proof of qualification as required for becoming an investment advisor.
4. Experience certificate in case of graduate.
5. CIBIL Score issued by the concerned authority.
6. Certificate issued by a Chartered Accountant specifying and authorizing the net worth of the corporate body.
7. ITR filed by the applicant during the immediately preceding 3 years.
8. Various other declarations, as required under the law.

FEE STRUCTURE EFFECTIVE FROM 1ST APRIL 2021

• For an individual or a partnership firm requiring registration as an investment advisor, an application fee of Rs. 2000 is to be made.
• In case of a body corporate or Limited Liability firm (LLP), the said application fee is of Rs. 10,000.
• After receiving approval from SEBI, individuals and partnership firms, are required to pay a registration fee of Rs. 3,000, to get the Certificate of Registration.
• In case of a body corporate or limited liability partnership firm, the said registration fee is of Rs. 15,000.
• Once such fees are received by SEBI, they will grant the Certificate of Registration to the respective applicant.

PROCESS OF REGISTRATION UNDER REGISTERED INVESTMENT ADVISOR

There are two options for filing application for getting registration under SEBI for an investment advisor. One is online mode, while the other one is offline mode. In the offline mode, the application form is required to be submitted at SEBI’s Head office or at any regional or local office in their nearby location.

OFFLINE PROCESS OF REGISTRATION

STEP-1 : The applicant must make an application to SEBI in Form A, provided in the Regulations along with all the necessary supporting documents.

STEP-2 : the applicant needs to submit the application with the requisite fees. After the receipt of the application for investment advisor registration, the applicant generally receives the reply from SEBI within one month. However, such a time period varies on different circumstances regarding the fulfilment of registration requirements, including the information provided.

STEP-3 : The applicant should ensure that he falls within the definition of an investment advisor as provided in SEBI regulations and be eligible to be an investment advisor. Such clarifications would help in fast processing of the application.

STEP-4 : The applicant should mention the type of registration made on the cover letter of the post carrying application form and documents. Where the applicant is an existing investment advisor, then provide the details of investment advice provided under the application for registration under previous regulations. Otherwise, in case of a new advisor, mention the same.

STEP-5 : The application be supported with duly filled Form A, and the same be properly signed and stamped by the applicant. Also, the requisite application fee applicable on the class of applicant, in the form of a bank draft and the same be in favour of “The Securities and Exchange Board of India”, payable at Mumbai.

ONLINE MODE OF REGISTRATION

STEP-1 : The applicant needs to visit the SEBI intermediary portal of SEBI and select the self-Registration menu.

STEP-2 : An application form will appear. The applicant needs to complete the application form by filling all the details and then click on proceed.

STEP-3 : After successful filing of application, the portal will redirect to a payment gateway and the applicant would have to gay the required application fee, using the online payment modes available on the gateway.

STEP-4 : After successful payment, the applicant will receive an acknowledgement mail from the department

STEP-5 : The applicant can use the acknowledgment number and the login credentials to track their application and to know their status.

STEP -6 : In case of incomplete application, the applicant is required to complete the same within 14 days from the receipt of mail. In case of failure, the applicant stands cancelled and the application fee will not be refunded.

GRANTING OF CERTIFICATE

SEBI after receiving an application for registration as an investment advisor, scrutinize the application and supporting documents. In case the same is found true and fair, and they are satisfied that the applicant fulfils all the required conditions, they shall inform the applicant regarding the same and ask the applicant for making the payment of registration fees.

On receiving the registration fees, as applicable, the SEBI shall issue the Certificate of Registration to the said applicant.

POST-REGISTRATION COMPLIANCES

1. After successful registration, the Investment Advisor is under the obligation to comply with the reporting requirements as specified by SEBI.
2. Also, the must regularly check the SEBI website for getting any updation or circulars or guidelines issued from SEBI.
3. In case there is any material change in details already furnished with SEBI, they are required to comply with the new guidelines and shall intimate the SEBI within a reasonable period of time.

BAN ON FREE TRIAL SERVICES

Another thing coming up in the market was free trial services by investment advisors, to prove their expertise and attract greater attention of investors. But SEBI came up with some new guideline, which are as follows –

1. With effect from 1^st January, 2020, new measures were announced by SEBI, to enhance the conduct of registered investment advisors.
2. As per the guidelines, the registered investment advisors were banned from giving free trials of services to their customers or accepting part payments for in exchange for their services.
3. Along with this, such registered investment advisors can only provide advice after conducting risk profiling of clients. They are also required to display complaints against them on their own websites and can accept payments only through banking channels.

CHANGES IN FEE STRUCTURE

SEBI provided some relief to upcoming investment advisors by reducing the fees of application and registration.

TYPE OF APPLICANT	APPLICATION FEES (INR)		REGISTRATION FEES (INR)
	OLD RATE	NEW RATE	OLD RATE	NEW RATE
INDIVIDUALS	5000	2000	10000	3000
PARTNERSHIP FIRMS	5000	2000	10000	3000
COMPANY	25000	10000	500000	15000
LIMITED LIABILITY PARTNERSHIP	25000	10000	500000	15000

Apart from this, there was a significant reduction in renewal fees for registration. The change was a follow –

TYPE OF APPLICANT	RENEWAL FEES (INR)
	OLD RATE	NEW RATE
INDIVIDUALS	10000	1000
PARTNERSHIP FIRMS	10000	1000
COMPANY	500000	5000
LIMITED LIABILITY PARTNERSHIP	500000	5000

It is to be noted that the registration certificate is valid for a period of 5 years and the application for renewal along with the requisite fees will be made within 3 months of the date of the expiry of 5 years’ time period.

For details refer to the circular:

SEBI has extended the date from 30 June to 15 Sept 2020 for the filing of financial results

Amendments in SEBI -Listing Obligations and Disclosure Requirements Regulations 2015

CONCLUSION

In India, we take up the services of lawyers, doctors, etc. and pay a fee for their advice, but we are not in the habit of paying fees or charges to Investment Advisors. The reason for this, could be lack of awareness due to indirect fee structure. But, where the investment involves lifetime savings and financial goals, taking professional investment advice with minor fees is a wise decision. The investment advisors registered with SEBI thoroughly understand the investor’s risk profile and their investment goals before giving any investment advice.

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