Registered Investment Advisor

Registered Investment Advisor

Subject :Economy

Context: SEBI will soon come out with guidelines for financial influencers, usually referred to as fin-fluencers–who give stock advice on social media platforms.

Details:

SEBI will make it mandatory for social media influencers to register and make them follow most of the other norms that are applicable to the registered financial advisors.

Concept:

• In India, the Securities and Exchange Board of India (SEBI) is a financial services regulator and market regulator.
• Investment advisors who are registered with SEBI can only provide financial advice to investors and clients with respect to various financial products.

Who needs to register as an Investment Advisor?

• Any individual, sole proprietor, partnership firm, company or body corporate can apply to be a Registered Investment Advisor (RIA) in India.
• If the number of clients exceeds 150 members, then it is mandatory for an advisor to register with SEBI. However, the following are exempted from SEBI registration:
  • Insurance agents or brokers registered with IRDAI
  • Pension advisors registered with PFRDA
  • Mutual fund distributors registered with AMFI who can provide basic advice to clients incidental to distribution activity
  • Members of Institute of Company Secretaries of India, Institute of Cost and Works Accountants of India, and Institute of Chartered Accountants of India who can provide advice to clients incidental to their services.
• SEBI Investment Advisers Regulation, 2013 regulates investment advisors in India.

Eligibility criteria

• For individual RIAs, partnership firms, companies and LLPs to be eligible to be an investment advisor, they need to meet the net worth requirements. 
  • For an individual, the net worth requirement is INR 5 lakhs. Before the amendment, the net worth requirements were INR 1 lakh.
• • A partnership firm has a net worth requirement of INR 50 lakhs. Prior to the amendment, the net worth requirements were INR 1 lakh.
  • For companies, body corporate and LLPs, the net worth requirement is INR 50 lakhs. Before the amendment, it was INR 25 lakhs.

Qualification

• Professional qualification or postgraduate degree or postgraduate diploma in finance, business management, banking, capital market, accountancy, commerce, economics, or insurance with five years of experience.
• Have a NISM level 2 certification.

What is the difference between an RIA and a financial advisor?

• An RIA or Registered Investment Advisor advises and manages the portfolio of high net worth individuals.
  • RIAs are required to be registered with SEBI.
• Financial advisors are individuals who offer guidance for investment, tax planning, insurance and retirement planning to investors for a fee.
  • They aren’t different from RIAs. However, they offer broader services than RIAs.
  •  Stockbrokers, insurance agents, financial planners all can be considered as financial advisors. They do not have a fiduciary obligation, but they are expected to serve the client’s best interest and make decisions that will benefit their client