The Securities and Exchange Board of India (SEBI) will relook at the requirement for investment advisers to give a full-fledged examination every three years.

SEBI’s chairperson, Madhabi Puri Buch, said that of the 1,300-odd investment advisers in the country, 35 per cent had still not registered with BSE Administration and Supervision, a supervisory body for such advisers.

Push for corporatisation

Buch pushed for the corporatisation of investment advisers, which could give an additional layer of protection to investors. Three years ago, SEBI had asked advisers with more than 150 clients to apply for a corporate licence. At present, 67 per cent of advisers are individuals.

SEBI, however, is willing to relook at the requirement for advisers to give a full-fledged examination every three years.

“We will evaluate what is dynamic and what is static. There may be no need for us to test advisers on the static stuff. The industry is free to send its recommendations and we will examine the same,” Buch said at a conference organised by the Association of Registered Investment Advisers (ARIA).

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Buch said the good guys had to help the regulator weed out the malpractices prevalent in the market. “It is clearly our failure that there are only a small set of investment advisers. We want a million investment advisers. But we cannot afford to have these to be of the Indore-types,” Buch said.

Buch said there were investment advisers who effectively ran a mutual fund distribution business and earned advertising revenues, which were essentially commissions. There were dozens of cases of illegal PMS being carried out, she said.

“There are distinct segments in the market that must be regulated differently, and we are open to looking at a segmented approach to regulation. The only caveat is that there are structural vulnerabilities, and adequate risk mitigation measures had to be built in to address the same,” Buch said.

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Over the last few months, SEBI has set up numerous forums to look at the implementation of industry standards as a part of its regulatory architecture, which it is keen to take forward.

Post-Budget, SEBI has constituted 16 Working Groups to recommend simplification of various regulations for entities such as mutual funds, brokers, portfolio managers, AIFs, and research analysts.

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