A sick person is unequivocally advised to see a doctor instead of self-diagnosing his illness, a broken water pipe needs a plumber to get fixed and a faulty wire connection needs an electrician for its repair — the same way, an investor who wants to invest in securities and mutual funds is recommended to seek the advice of a Sebi-registered investment advisor, also known as RIA.
This is in stark contrast to the routine behaviour exhibited by a large number of young investors who tend to get swayed with arbitrary and unsubstantiated advice shared by the so-called finfluencers on the social media platforms.
“Taking influencers’ advice is like taking medication based on the recommendation given on Google. If you are not well, you should go to a doctor and not browse Google and take the medication. Similarly, to generate wealth, one has to understand different products that are suitable and based on the suitability analysis, an advice is given by a registered investment advisor, and the advice is generally very personal — and hence it is known as ‘personal finance’,” says Sridharan S., a Sebi-registered investment advisor and Founder of Wealth Ladder Direct.
Who are SEBI-registered advisors?
These are investment advisors who are certified by the capital markets regulator Securities Exchange Board of India (Sebi) to share their advice with investors for a fee with regards to making investments in securities markets. The rules relating to investment advisors are defined in the SEBI Regulations, 2013.
The SEBI (Investment Advisers) Regulations, 2013 were notified on January 21, 2013.
Do CAs, CSs or ICWAs also need to seek registration under IA regulations?
The members of the ICSI, ICAI and ICWAI may provide advice to their clients incidental to their professional services, in which case they are exempted from obtaining registration under IA Regulations.
For instance, when a CA gives advice to his client about tax planning and in the process, he tells him to invest in ELSS, it will be seen as incidental to his profession as a tax consultant.
Who can become an RIA?
Any person who is engaged or willing to engage in the business of providing investment advice to clients or other persons or groups of persons is required to make an application under IA regulations.
How to obtain registration?
Application can be made in form A as specified in First Schedule of 1A Regulations with necessary supporting documents.
The application for registration as an investment advisor can be filed with the head office or the concerned regional office/local office of Sebi under the jurisdiction where the registered address of the applicant is located.
When does Sebi give the certificate?
Once Sebi is satisfied that the applicant complies with the requirements, approve the application and upon receipt of the payment of registration fee, grant certificate of registration subject to such terms and conditions.
After receiving the approval from Sebi, the applicant must pay a registration fee of ₹2,000 (in case of individual) and RS 10,000 (in case of corporate applicant).
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