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Regulatory Framework for Investment Advisers

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Pursuant to SEBI’s Consultation Paper on Review of Regulatory Framework for Investment Advisers (IA) released in January 2020, the SEBI (Investment Advisers) (Amendment) Regulations, 2020 have been notified in the gazette.

The amendments include changes in relation to the following:

1. Segregation of advisory and distribution activities: An individual IA may register either as an IA or provide distribution services while a non-individual IA is required to segregate at the client level and have an arm’s length relationship between investment advisory and distribution services.

2. Allowing IAs to provide implementation services through direct schemes / products in the market.

3. Mandatory requirement of an agreement between a RIA and their client.

4. Fee charged by IA must be in the manner specified by SEBI.

5. Eligibility criteria: Increase of minimum net-worth requirements for individual investment advisers to INR 5 lakhs for individuals and INR 50 lakhs for non-individuals (with 3 years for existing RIAs to comply); enhancing eligibility criteria with respect to qualifications and experience; and making it mandatory for an individual IA with over 150 clients to register as a non-individual IA.

These amendments come into force 90 days from today.

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