Register as non-individual RIA if clientele exceeds 150: SEBI

By Ravi Samalad |  04-07-20 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

Securities and Exchange Board of India (SEBI) has asked individual Registered Investment Advisers (RIAs) whose total clients exceed 150 to register as non-individual RIAs.

The new net worth criteria for non-individual RIAs and individual RIAs is Rs 50 lakh and Rs 5 lakh, respectively. RIAs feel this move could deter new entrants from taking up RIA services. The current net worth requirement for individual RIA is Rs 1 lakh.

In its consultation paper, SEBI had proposed that individual RIAs whose AUA exceeds Rs 40 crore will also have to register as non-individual RIA. This point on AUA has no mention in the latest SEBI notification. This means there could be some relaxation on the quantum of assets that individual RIAs can manage which will exempt them from registering as non-individual RIA even if their AUA exceeds Rs 40 crore.

Segregation of RIA and distribution services

Individuals can now be either a distributor or RIAs. However, non-individual investment advisers can have client level segregation at a group level for investment advisory and distribution services and maintain an arm’s length relationship between its activities by providing advisory services through a separately identifiable department or division.

Implementation services

Investment Advisers can provide execution services through direct plans. However, no consideration can be received directly or indirectly, at investment adviser’s group or family level for these services.

Qualification    

Individual investment adviser or a principal officer of a non-individual investment adviser to have enhanced professional or post-graduate qualification in relevant subjects and relevant experience of five years while grandfathering existing Individual Investment Advisers from complying with the enhanced qualification and experience as specified by SEBI.

Fee    

SEBI said that the guidelines regarding key terms and conditions of Investment Advisory Services agreement, modes of charging fee, periodicity, etc. will be separately specified through a circular.

In its consultation paper, SEBI had proposed that RIAs could charge either up to 2.5% of assets under advisory or a flat fee which cannot exceed Rs 75,000 per annum per family across all schemes and services.

These norms will come into force on the ninetieth day from the date of their publication in the Official Gazette.

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