The SEBI has issued consultation paper proposing amendments or clarifications to the investment adviser regulations. The objective of the consultation paper is to specify uniform standards across all the intermediaries/persons engaged in providing investment advisory services irrespective of whether such activity is incidental to their primary activity or not and to address the gaps or overlaps in legal or regulatory standards.
The key highlights of consultative papers are as under:
1. Ban on circulation of trading tips via social media platform: SEBI has proposed to curb the practice of providing trading tips (containing buy or sell recommendation on securities) to the general public through any social media platform such as SMSs, email, telephonic call, whatsapp, ChatOn, Wechat, Twitter, Facebook, etc.
2. Restrictions on mutual fund distributors: Under the existing norms, a mutual fund distributor can sell mutual fund products and he can also provide basic advice on mutual fund products and in executing the transactions. It has been proposed that only corporate entities registered as investment advisers should offer execution or distribution services. Further, mutual fund distributors should be registered as investment advisors if they want to engage themselves in providing incidental or basic investment advisory services on mutual fund products.
3. No exemption for professionals: Under the existing norms Chartered Accountants, Company Secretaries, Portfolio investors, stock brokers, etc., are exempted from registration to act as investment advisors. But now SEBI has proposed that all the persons engaged in financial planning services shall mandatorily be required to register themselves as investment advisors.
4. Ban on schemes, games, and competitions: It is observed that various entities are observed that various entities are offering schemes, competitions, games, leagues, etc., related to securities market. Such Schemes are generally based on predicting the price movement of securities and they are neither approved nor endorsed by SEBI. In order to protect the interest of the investors in the securities market and to curb such practice of offering schemes, etc., it is proposed to add new provision to restrict such activities.