SEBI, RBI may jointly regulate wealth management, investment advisory

Shishir Sinha New Delhi | Updated on August 17, 2011

Committee on financial stability development discusses the plan

The famous Shivraj Puri-Citibank Case may bring the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) together to regulate wealth management and investment advisory services by banks.

Wealth management and investment advisory services involve investment in capital market and banking transactions. So, the capital market regulator SEBI and the banking regulator RBI could be asked to regulate jointly, sources told Business Line A formal decision could be taken soon, added a source.

Regulatory issues in wealth management, private banking and investment advisory services by banks was part of the agenda of the Financial Stability Development Council's (FSDC) Sub Committee meeting that took place on Tuesday.

A senior Finance Ministry official although refused to give details about what transpired in the meeting. However, a RBI statement issued after the meeting said that the sub-committee did deliberate upon issues concerning regulation of investment advisory services.

Experts feel joint regulation could have coordination issues, which could lead to conflict. . The ULIP controversy is one of the examples. However, sources said that after the establishment of FSDC, there should not be any problem on co-ordination or conflict.

It may be recalled that last year, Mr Shivraj Puri, a former Citibank executive had duped nearly 20 corporate and 30 individuals. He managed to mobilise nearly Rs 300 crore through accounts set up by him making them believe they were investing in a scheme Citibank was offering.

Mr Puri was arrested later. Then the RBI fined Citibank for failing to follow Know Your Client (KYC) and Anti Money Laundering (AML) norms while opening the accounts. RBI believed that this led to the perpetration of a fraud at Gurgaon branch of Citibank.

Single KYC for entire capital market

In the meantime, sources said that SEBI is likely to start single KYC within next six month for all the investment in the capital market.

This will be done through KYC Registration Agency. This agency will undertake KYC at the stage of account-opening for all clients in the securities market through SEBI Regulated Points of Service.

Sources also said that others participants of the financial market such as Bank, Insurance companies and Pension Fund may find the data collected by KYC registration agency useful. Finally this data could form the basis of single KYC for entire financial market.


Published on August 17, 2011

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