In its new set of rules for an estimated $1 trillion wealth management industry, the SEBI is planning to set up an intermediary regulatory body with representation from among the wealth managers themselves.
In the proposed self-regulatory model, the market watchdog will put the onus entirely on wealth managers for compliance to the regulations and the new entity to be created under SEBI’s guidance would work as the first stage regulator as also market development authority, a senior official said.
The decision to set up a self-regulatory organisation (SRO) for wealth managers has been taken with a twin objective of regulating them without hampering the growth prospects of this burgeoning segment of financial services sector, he added.
The SRO model, where the wealth managers or investment advisors would be asked to develop a stringent code of conduct in consultation with SEBI, would be complemented with stern penalty measures for erring entities.
The SEBI would provide an initial funding of Rs 10 crore for setting up of this SRO for wealth managers, after which the industry would have to pool in their own resources.
The proposed move is in line with similar measures earlier taken for mutual funds and merchant bankers, whose industry bodies AMFI (Association of Mutual Funds in India) and AMBI (Association of Merchant Bankers in India) serve as first stage regulators.
The new body would also serve as a medium for SEBI to implement its various initiatives for the wealth managers.
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