SEBI Proposes To Ease Norms For Certification Of Fee-Only Investment Advisors

In a bid to increase the number of professionals engaged in advising individuals about investments and money management, the Securities and Exchange Board of India has proposed a change in regulations to ease entry barriers for fee-only investment advisors and research analysts.

SEBI-registered investment advisors have been in dialogue with the regulator to ease norms, which were seen as too restrictive. They argued that the high entry barriers to registering as fee-only investment advisors have meant that the number of such professionals has not grown and has been unable to keep pace with the growing number of investors that need guidance.

Instead, many individuals have chosen to opt for registration as mutual fund distributors, which has so far been an easier accreditation to receive. A fee-only investment advisor offers their services for an upfront fee, much like other professionals, like doctors. On the other hand, mutual fund distributors receive a commission on the sale of schemes, which is paid by mutual funds. This cost is ultimately borne by the investor. 

Among the key changes being proposed, those looking to register as investment advisors and research analysts will only need graduate degrees as opposed to the earlier requirement of postgraduate degrees, according to a consultation paper released by the market regulator on Tuesday.

Additionally, those applying for the certification will only need to clear the National Institute of Securities Markets examination once, at the time of the initial application. Subsequently, for the renewal of certification, advisors will only have to remain updated on incremental changes or developments over the preceding three years or the time period specified by SEBI.

There will also be no relevant work experience requirement for aspirants. This is an attempt to bring parity to the registration of mutual fund distributors, which are far more numerous. Earlier, a minimum relevant experience of five years was a requirement.

Finally, the requirement of a minimum net worth is being proposed to be removed. Instead, SEBI is proposing a deposit of money to be maintained, which will increase based on the number of clients and revenue of the investment advisor.