Coming down hard on fraudulent investment advisers, regulator Sebi on Friday proposed to ban trading tips via bulk SMSes and emails, as also to clamp down on games, competitions and leagues relating to the securities market. Sebi also plans to curb unsolicited investment advice and promotion of investment products through electronic and broadcasting media platforms.
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Besides, Sebi will have a re-look on the exemption from registration as an investment adviser, provided to mutual fund distributors and other registered market intermediaries, as part of an overhaul of rules governing investment advisers.
These proposals, approved by the Sebi board at its meeting in Mumbai, are aimed at having “uniform standards” as well as address the gaps or overlaps in legal or regulatory standards governing all the intermediaries/persons engaged in providing investment advisory services.
Securities and Exchange Board of India (Sebi) will come out with a consultation paper on these amendments.
The regulator would look at “restriction on providing trading tips via bulk SMS, email, etc. and restriction on soliciting investors by offering schemes/competitions/games/leagues/etc. related to securities market,” an official release said.
Besides, such activities would be covered under advertisement code as well as Sebi norms.
While providing clarification with respect to investment product and investment advice given in electronic/broadcasting media, the regulator has proposed to look at the “applicability of advertisement code to be followed by any person including the investment advisers while issuing advertisement”.
Further, Sebi would look at giving three years time to mutual fund distributors who seeks to migrate as an investment adviser in order to enable them to obtain necessary certification as well as comply with requisite norms.
Currently, there is exemption from registration as an investment adviser provided to mutual fund distributors and SEBI registered intermediaries for giving investment advice as an incidental activity to their primary activity.
Segregation of investment advisory services through a separate subsidiary within 3 years would also be looked at.
The watchdog would make efforts to provide more clarity about the activities carried out by investment advisers and research analysts.
Other issues that would touched upon in the consultation paper are clarity on mode of acceptance of fee, “requirement of providing ‘Rights and Obligations’ document to the clients” and requirements for providing online investment advisory services and use of automated tools.
The regulator had notified the Sebi (Investment Advisers) Regulations, 2013 in January that year.
Under those norms, exemption from registration as an investment adviser are there for certain entities who were providing investment advice as an incidental activity to their primary activity.