SEBI Proposes Easing Regulations for Investment Advisors

SEBI has proposed that as opposed to the existing requirement of a post-graduate degree, a new RIA needs to only have a graduate degree. This move is aimed at making it easier for individuals to become registered investment advisors (RIAs) and enter the market. The market regulator, in a consultation paper released on Tuesday, has proposed relaxed regulations and requirements for investment advisors, making it more accessible for professionals to join the industry.

First, before any advice is given or fees charged, there must be a signed investment advisory agreement detailing all the terms and conditions. This ensures transparency and clarity between the advisor and the client, setting clear expectations for both parties. SEBI has also proposed to lower eligibility criteria, scrap net worth requirements, and ease fee regulation in a move aimed at attracting more professionals to become RIAs.

RIAs advise on various SEBI-registered investment products. Unlike a distributor who earns a commission, RIAs charge a fee from their clients for the services provided. This fee-based model is seen as more aligned with the client's interests, as the advisor's compensation is not tied to the products they recommend.

In a Consultation Paper on Review of Regulatory Framework for Investment Advisers and Research Analysts dated Aug 6th, 2024, SEBI has outlined the proposed changes in detail. The paper highlights the need for a more inclusive and accessible regulatory framework that encourages more professionals to enter the field of investment advisory.

Waterfield Financial and Investment Advisors, a SEBI-registered investment advisor, has announced the launch of Founders Circle, a program aimed at supporting and mentoring new RIAs. This initiative is in line with SEBI's efforts to promote growth and diversity in the investment advisory industry.

The new norms ban registered entities from collaborating with unregistered investment advisors, known as 'finfluencers'. This measure is aimed at protecting investors and ensuring that only qualified professionals are providing investment advice in the market.