Sebi comes out with stringent norms for investment advisers
of such advice.
Sebi said that advisers must disclose the fee they get for advice on a particular product, their holdings in products on which they are advising, the risks involved and any conflict of interest arising out of their association with issuers of the financial products.
It would be mandatory for investment advisors to maintain all records like know your customer (KYC), risk profiling, suitability sheets, agreement copies, investment advice, whether oral or written, data on fees and time of providing advice for at least five years either in electronic or physical form.
The guidelines, which would come into force within three months, require advisers to be certified by Sebi.
Entities which are working as advisers have to receive the certification within six months of the rules coming into force. The certification would be valid for five years and has to be renewed three months before the expiry.
However, Sebi has exempted a few individual from registration including those who give general advice in good faith, advocates, who advice their clients incidental to legal practice and insurance agents who give investment advice solely on insurance products.
"An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise," Sebi said.
The regulator said existing investment advisers seeking registration under the regulations should ensure their partners and representatives obtain such certification within two years from the date of commencement of these regulations and the same is renewed before the expiry.
Sebi said an individual registered as
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