SEBI to monitor unregistered portfolio advisors

Mumbai: SEBI has released a concept paper on issues involved in regulation of investment advisors, inviting comments from the public.

Currently large number of entities, not registered with SEBI, are rendering investment advice to specific clients, without any formal contract, says the concept note.

In the concept paper SEBI said that regulation of all non-registered entities rendering investment advice to specific clients mentioned above will require enormous resources and reach.

There are likely to be lakh of advisors and distributors in India and it would not be feasible for SEBI to regulate such a large number directly as a frontline regulator within its current resources or even with resources likely to be available to it in foreseeable future even after taking into account its expansion plans.

According to the concept note a view is emerging as to the creation of a private sector self-financing Regulatory Organisation (RO) to be the first-level regulator for investment advisors. The RO should develop principle-based regulations with risk-based examinations and implement regulation of discrete market segments in phases.

The organisation should publish regulations defining the process for regulation and registration, entry and exit, reporting and market conduct. These should include regulations on advertising, performance reporting and presentation, disclosure of conduct, experience and conflicts, disclosure of services and fees, prices and commissions and fair dealing.

The regulator has also expressed concerns over entities (including journalists) not registered with SEBI rendering investment advice on media. SEBI had recently banned stock advisor Anirudh Sethi from acting as an "unregistered portfolio manager" or recommending stocks to clients.