Investment_Advisers_Jan11

Investment_Advisers_Jan11_2021
3 (1) On and from the commencement of these regulations, no person shall act as aninvestment adviser or hold itself out as an investment adviser unless he has obtained acertificate of registration from the Board under these regulations:9[***]10[(1A) Notwithstanding anything contained in sub-regulation (1), any application madeby a person prior to coming into force of these regulations containing such particulars oras near thereto as mentioned in Form A of First Schedule shall be treated as an applicationmade in pursuance of sub-regulation (1) and dealt with accordingly;]Advisers) (Amendment) Regulations, 2020,.omission, regulation 3(1) proviso read as under; Provided that a person acting as an investment adviser immediately before the commencement of theseregulations may continue to do so for a period of six months from such commencement or, if it has made anapplication for a certificate under sub-regulation (2) within the said period of six months, till the disposal of suchapplication. 4(2) An application for grant of certificate of registration shall be made in Form A asspecified in the First Schedule to these regulations and shall be accompanied by a non-refundable application fee to be paid in the manner specified in Second Schedule.11[(3) On and from the date of commencement of these regulations, no person, whiledealing in distribution of securities, shall use the nomenclature Independent FinancialAdviser or IFA or Wealth Adviser or any other similar name unless registered with the
4 The following persons shall not be required to seek registration under regulation 3 subject to the fulfillment of the conditions stipulated therefor, (a) Any person who gives general comments in good faith in regard to trends in thefinancial or securities market or the economic situation where such comments donot specify any particular securities or investment product;(b) Any insurance agent or insurance broker who offers investment advice solely ininsurance products and is registered with Insurance Regulatory and DevelopmentAuthority for such activity;(c) Any pension advisor who offers investment advice solely on pension products andis registered with Pension Fund Regulatory and Development Authority for suchactivity;(d) Any distributor of mutual funds, who is a member of a self regulatory organisationrecognised by the Board or is registered with an association of asset managementcompanies of mutual funds, providing any investment advice to its clients incidentalto its primary activity;(e) Any advocate, solicitor or law firm, who provides investment advice to their clients,incidental to their legal practise;(f) Any member of Institute of Chartered Accountants of India, Institute of CompanySecretaries of India, Institute of Cost and Works Accountants of India, ActuarialSociety of India or any other professional body as may be specified by the Board ,who provides investment advice to their clients, incidental to his professionalservice;(g) Any stock broker or sub-broker registered under SEBI (Stock Broker and Sub-Broker) Regulations, 1992, portfolio manager registered under SEBI (PortfolioManagers) Regulations, 1993 or merchant banker registered under SEBI (MerchantBankers) Regulations, 1992, who provides any investment advice to its clientsincidental to their primary activity:Provided that such intermediaries shall comply with the general obligation(s) andresponsibilities as specified in Chapter III of these regulations:5Provided further that existing portfolio manager offering only investment advisoryservices may apply for registration under these regulations after expiry of hiscurrent certificate of registration as a portfolio manager;(h) Any fund manager, by whatever name called of a mutual fund, alternativeinvestment fund or any other intermediary or entity registered with the Board ;(i) Any person who provides investment advice exclusively to clients based out ofIndia:Provided that persons providing investment advice to Non-Resident Indian orPerson of Indian Origin shall fall within the purview of these regulations;(j) Any 12[principal officer, persons associated with advice] and partner of aninvestment adviser which is registered under these regulations:Provided that such 13[principal officer, persons associated with advice] and partner shall comply with regulation 7 of these regulations;(k) Any other person as may be specified by the Board .
5 (1) The Board may require the applicant to furnish further information or clarificationregarding matters relevant to investment advisory services for the purpose ofconsideration of the application filed under sub-regulation (2) of regulation 3.
5 (2) The applicant or his authorised representative , if so required, shall appear beforethe Board for personal representation.
6 For the purpose of the grant of certificate the Board shall take into account all matters which are relevant to the grant of certificate of registration and in particular the following, namely, (a) whether the applicant is an individual or 14[a non-individual];15[(b) in case the applicant is an individual, he and all persons associated with investmentadvice are appropriately qualified and certified as specified in regulation 7;.13 Regulations, 2020,.substitution, clause (b) read as under ; whether in case the applicant is an individual, he is appropriately qualified and certified as specified in regulation7; .616[(c) in case the applicant is a body corporate, the principal officer and all personsassociated with investment advice of the applicant are appropriately qualified andcertified as specified in regulation 7;]17[(d) in case the applicant is a firm or a limited liability partnership, the principal officerand all persons associated with investment advice of the applicant are appropriatelyqualified and certified as specified in regulation 7;](e) whether the applicant fulfills the 18[networth] requirements as specified in regulation8;19[(f) whether the applicant , its partners, principal officer and persons associated withinvestment advice, if any, are fit and proper persons based on the criteria asspecified in Schedule II of the Securities and Exchange Board of India(Intermediaries) Regulations, 2008;](g) whether the applicant has the necessary infrastructure to effectively discharge theactivities of an investment adviser;(h) whether the applicant or any person directly or indirectly connected with the applicant has in the past been refused certificate by the Board and if so, the groundsfor such refusal;(i) whether any disciplinary action has been taken by the Board or any other regulatoryauthority against any person directly or indirectly connected to the applicant under the respective Act, rules or regulations made there under ;(j)(k)In case a bank or an NBFC proposes to under take investment advisory services,whether it has been permitted by Reserve Bank of India and the application is madethrough a subsidiary or separately identifiable department or division;In case any 20[non-individual], other than a Bank or NBFC, which proposes to under take investment advisory services, whether, the application is made througha separately identifiable department or division;substitution, clause (c) read as under ; whether in case the applicant is a body corporate, all the representatives of the applicant who provide investmentadvice are appropriately qualified and certified as specified in regulation 7; substitution, clause (d) read as under ; whether in case the applicant is a firm or a limited liability partnership, all partners who are engaged in givinginvestment advice are qualified and certified as specified in regulation 7; 2020,.substitution, clause (f) read as under ; whether the applicant , its representatives and partners, if any, are fit and proper persons based on the criteria asspecified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; 2020,.7(l)In case an entity incorporated outside India under takes to provide investmentadvisory services under these regulations, whether, it has set up a subsidiary inIndia and whether such subsidiary has made the application for registration;(m) In case a foreign citizen proposes to under take investment advisory services,whether the applicant has set up an office in India and proposes to under takeinvestment advisory services through such office;21[(n)Whether the applicant is a member of a recognized body or body corporate asspecified under regulation 14:Provided that the existing investment advisers shall comply with the requirement
7 (1) An individual investment adviser or a principal officer of a non-individual investmentadviser registered as an investment adviser under these regulations, shall have thefollowing minimum qualification, at all times -(a) A professional qualification or post-graduate degree or post graduate diploma(minimum two years in duration) in finance, accountancy, business management,commerce, economics, capital market, banking, insurance or actuarial science fromsubstitution, regulation 7 read as under; Qualification and certification requirement.An individual registered as an investment adviser under these regulations and partners and7(1)representatives of an investment adviser registered under these regulations offering investment advice shall havethe following minimum qualifications, at all times:(a)A professional qualification or post-graduate degree or post graduate diploma in finance,accountancy, business management, commerce, economics, capital market, banking, insurance oractuarial science from a university or an institution recognized by the central government or any stategovernment or a recognised foreign university or institution or association; or(b) A graduate in any discipline with an experience of at least five years in activities relating to advice infinancial products or securities or fund or asset or portfolio management.
7 (2)An individual registered as an investment adviser and partners and representatives of investmentadvisers registered under these regulations offering investment advice shall have, at all times, a certification onfinancial planning or fund or asset or portfolio management or investment advisory services:(a)(b)from NISM; orfrom any other organization or institution including Financial Planning Standards Board India or anyrecognized stock exchange in India provided that such certification is accredited by NISM.:Provided that the existing investment advisers seeking registration under these regulations shall ensure that theirpartners and representatives obtain such certification within two years from the date of commencement of these regulations :Provided further that fresh certification must be obtained before expiry of the validity of the existing certificationto ensure continuity in compliance with certification requirements. 8a university or an institution recognized by the Central Government or any StateGovernment or a recognised foreign university or institution or association or aCFA Charter from the CFA Institute;(b) An experience of at least five years in activities relating to advice in financialproducts or securities or fund or asset or portfolio management;(c) Persons associated with investment advice shall meet the following minimumqualifications, at all times -(i) a professional qualification as provided in clause (a) of sub-regulation (1) ofregulation 7; and(ii) an experience of at least two years in activities relating to advice in financialproducts or securities or fund or asset or portfolio management:Provided that investment advisers registered under these regulations as on the dateof commencement of these regulations shall ensure that the individual investmentadviser or principal officer of a non-individual investment adviser registered underthese regulations and persons associated with investment advice comply with suchqualification and experience requirements within three years:Provided further that the requirements at clauses (a) and (b) shall not apply to suchexisting individual investment advisers as may be specified by the Board.
7 (2) An individual investment adviser or principal officer of a non-individual investmentadviser, registered under these regulations and persons associated with investment adviceshall have, at all times a certification on financial planning or fund or asset or portfoliomanagement or investment advisory services -(a)from NISM; or(b)from any other organization or institution including Financial Planning StandardsBoard of India or any recognized stock exchange in India provided such certificationis accredited by NISM:Provided that fresh certification must be obtained before expiry of the validity of theexisting certification to ensure continuity in compliance with certification requirements:Provided further that fresh certification before expiry of the validity of the existingcertification shall not be obtained through a CPE program.]23[Networth.substitution, regulation 8 read as under; Capital adequacy.(1) Investment advisers which are body corporate shall have a net worth of not less than twenty five lakh rupees.plus free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulatedlosses, deferred expenditure not written off, including miscellaneous expenses not written off, and capital
8 (1) Investment advisers who are non-individuals shall have a net worth of not less thanfifty lakh rupees.of paid up share capital plus free reserves (excluding reserves created out of revaluation)reduced by the aggregate value of accumulated losses, deferred expenditure not writtenoff, including miscellaneous expenses not written off, and networth requirement for otherservices offered by the advisers in accordance with the applicable rules and regulations .
8 (2) Investment advisers who are individuals shall have net tangible assets of value notless than five lakh rupees:Provided that existing investment advisers shall comply with the networth requirementwithin three years from the date of commencement of the SEBI (Investment Advisers)(Amendment) Regulations, 2020.]
9 The Board on being satisfied that the applicant complies with the requirements specified in regulation 6 shall send intimation to the applicant and on receipt of the payment of registration 24[***] fees as specified in Second Schedule, grant certificate of registration in Form B under First Schedule, subject to such terms and conditions as the Board may deem fit and appropriate.
10 The certificate of registration granted under regulation 9 shall be valid 25[till it is suspended or cancelled by the Board.]
11 26[The investment adviser which has already been granted certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India adequacy requirement for other services offered by the advisers in accordance with the applicable rules andregulations.
11 (2) Investment advisers who are individuals or partnership firms shall have net tangible assets of value not lessthan rupees one lakh:Provided that existing investment advisers shall comply with the capital adequacy requirement within one yearfrom the date of commencement of these regulations. Registration of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016.Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016w.e.f. 08-12-2016.Intermediaries) (Amendment) Regulations, 2016. Prior to substitution regulation 11 read asunder: 11. (1) Three months before the expiry of the period of validity of the certificate, the investment adviser may, ifhe so desires, make an application in Form A for grant of renewal of certificate of registration.
11 (2)The application for renewal under sub-regulation (1) shall be dealt with in the same manner as if it were anapplication made under sub-regulation (2) of regulation 3 for grant of certificate. 10(Change in Conditions of Registration of Certain Intermediaries) (Amendment)Regulations, 2016 shall be deemed to have been granted a certificate of registration, interms of sub-regulation (1).]
12 (1) After considering an application made under regulation 3, if the Board is of theopinion that a certificate should not be granted to the applicant , it may reject theapplication after giving the applicant a reasonable opportunity of being heard.
12 (2) The decision of the Board to reject the application shall be communicated to theapplicant within thirty days of such decision.
12 (3) Where an application for a certificate is rejected by the Board , the applicant shallforthwith cease to act as an investment adviser:Provided that nothing contained in this regulation shall affect the liability of the applicant towards its existing clients under law.
13 The certificate granted under regulation 9 shall, inter alia, be subject to the following conditions:-(a)(b)the investment adviser shall abide by the provisions of the Act and these regulations;the investment adviser shall forthwith inform the Board in writing, if anyinformation or particulars previously submitted to the Board are found to be falseor misleading in any material particular or if there is any material change in theinformation already submitted;(c)the investment adviser, not being an individual, shall include the words investmentadviser in its name:Provided that if the investment advisory service is being provided by a separatelyidentifiable department or division or a subsidiary, then such separately identifiabledepartment or division or subsidiary shall include the words investment adviser inits name;(d)individuals registered as investment advisers shall use the term investment adviser in all their correspondences with their clients27[;]28[(e) individuals registered as investment advisers whose number of clients exceed onehundred and fifty in total, shall apply for registration as non-individual investment adviserwithin such time as may be specified by the Board.]09-2020.11
14 (1) The Board may recognize any body or body corporate for the purpose of regulatinginvestment advisers.
14 (2) The Board may, at the time of recognition of such body or body corporate , delegateadministration and supervision of investment advisers to such body or body corporate onsuch terms and conditions as may be specified by the Board.
14 (3) The Board may specify that no person shall act as an investment adviser unless heis a member of a recognized body or body corporate and in such event, provisions ofthese regulations and byelaws or articles of such body or body corporate shall apply
15 (1) An investment adviser shall act in a fiduciary capacity towards its clients and shalldisclose all conflicts of interests as and when they arise.
15 (2)An investment adviser shall not receive any consideration by way of remunerationor compensation or in any other form from any person other than the client being advised,in respect of the underlying products or securities for which advice is provided.
15 (3) An investment adviser shall maintain an arms-length relationship between itsactivities as an investment adviser and other activities.
15 (4) An investment adviser which is also engaged in activities other than investmentadvisory services shall ensure that its investment advisory services are clearly segregatedfrom all its other activities, in the manner as prescribed hereunder.
15 (5) An investment adviser shall ensure that in case of any conflict of interest of theinvestment advisory activities with other activities, such conflict of interest shall bedisclosed to the client .
15 (6) An investment adviser shall not divulge any confidential information about itsclient, which has come to its knowledge, without taking prior permission of its clients,except where such disclosures are required to be made in compliance with any law forthe time being in force.
15 (7) An investment advisor shall not enter into transactions on its own account which iscontrary to its advice given to client s for a period of fifteen days from the day of suchadvice.Provided that during the period of such fifteen days, if the investment adviser is of theopinion that the situation has changed, then it may enter into such a transaction on its ownaccount after giving such revised assessment to the client at least 24 hours in advance ofentering into such transaction.
15 (8) An investment advisor shall follow Know Your Client procedure as specified bythe Board from time to time.
15 (9) An investment adviser shall abide by Code of Conduct as specified in ThirdSchedule.
15 (10)An investment adviser shall not act on its own account, knowingly to sellsecurities or investment products to or purchase securities or investment product from aclient.
15 (11) In case of change in control of the investment adviser, prior approval from the Boardshall be taken.
15 (12) Investment advisers shall furnish to the Board information and reports as may bespecified by the Board from time to time.
15 (13) It shall be the responsibility of the investment adviser to ensure compliance withthe certification and qualification requirements as specified under Regulation 7 at all times.
15A Investment Adviser shall be entitled to charge fees for providing investment advice from a client in the manner as specified by the Board.]
16 Investment adviser shall ensure that,-(a) it obtains from the client , such information as is necessary for the purpose of givinginvestment advice, including the following:-(i) age;(ii) investment objectives including time for which they wish to stay invested, thepurposes of the investment ;(iii) income details;(iv ) existing investments/ assets;(v) risk appetite/ tolerance;(vi) liability/borrowing details.(b) it has a process for assessing the risk a client is willing and able to take, including:substitution, sub-regulation (13) read as under; (13) It shall be the responsibility of the Investment Adviser to ensure that its representatives and partners, asapplicable, comply with the certification and qualification requirements under Regulation 7 at all times. 13(i) assessing a client s capacity for absorbing loss;(ii) identifying whether client is unwilling or unable to accept the risk of loss ofcapital;(iii) appropriately interpreting client responses to questions and not attributinginappropriate weight to certain answers.(c) where tools are used for risk profiling, it should be ensured that the tools are fit forthe purpose and any limitations are identified and mitigated;(d) any questions or description in any questionnaires used to establish the risk a client is willing and able to take are fair, clear and not misleading, and should ensure that:(i) questionnaire is not vague or use double negatives or in a complex languagethat the client may not understand;(ii) questionnaire is not structured in a way that it contains leading questions.(e) risk profile of the client is communicated to the client after risk assessment is done;(f)
17 Investment adviser shall ensure that,-(a) All investments on which investment advice is provided is appropriate to the riskprofile of the client ;(b) It has a documented process for selecting investments based on client s investmentobjectives and financial situation;(c) It understands the nature and risks of products or assets selected for client s;(d) It has a reasonable basis for believing that a recommendation or transaction enteredinto:(i) meets the client s investment objectives;(ii)is such that the client is able to bear any related investment risks consistentwith its investment objectives and risk tolerance;(iii) is such that the client has the necessary experience and knowledge tounderstand the risks involved in the transaction.(e) Whenever a recommendation is given to a client to purchase of a particular complexfinancial product, such recommendation or advice is based upon a reasonableassessment that the structure and risk reward profile of financial product is consistentwith client s experience, knowledge, investment objectives, risk appetite and capacity
18 (1) An investment adviser shall disclose to a prospective client , all materialinformation about itself including its business, disciplinary history, the terms and14conditions on which it offers advisory services, affiliations with other intermediaries andsuch other information as is necessary to take an informed decision on whether or not toavail its services.31[***](4) An investment adviser shall disclose to the client its holding or position, if any, inthe financial products or securities which are subject matter of advice.
18 (5) An investment adviser shall disclose to the client any actual or potential conflictsof interest arising from any connection to or association with any issuer of products/securities, including any material information or facts that might compromise itsobjectivity or independence in the carrying on of investment advisory services.
18 (6) An investment adviser shall, while making an investment advice, make adequatedisclosure to the client of all material facts relating to the key features of the products orsecurities , particularly, performance track record.
18 (7) An investment adviser shall draw the client s attention to the warnings, disclaimersin documents, advertising materials relating to an investment product which it isrecommending to the client .
19 (1) An investment adviser shall maintain the following records,-(a) Know Your Client records of the client ;(b ) Risk profiling and risk assessment of the client ;(c) Suitability assessment of the advice being provided;32[(d ) Copies of agreements with client s, incorporating the terms and conditions asmay be specified by the Board;](e) Investment advice provided, whether written or oral;(f) Rationale for arriving at investment advice, duly signed and dated;omission, sub-regulation (2) and (3) read as under; (2) An investment adviser shall disclose to its client , any consideration by way of remuneration or compensationor in any other form whatsoever, received or receivable by it or any of its associates or subsidiaries for anydistribution or execution services in respect of the products or securities for which the investment advice isprovided to the client .
19 (3) An investment adviser shall, before recommending the services of a stock broker or other intermediary to aclient, disclose any consideration by way of remuneration or compensation or in any other form whatsoever, ifany, received or receivable by the investment adviser, if the client desires to avail the services of such intermediary . substitution, clause (d) read as under; (d)Copies of agreements with clients, if any; 15(g) A register or record containing list of the clients, the date of advice, nature ofthe advice, the products/securities in which advice was rendered and fee, if anycharged for such advice.
19 (2) All records shall be maintained either in physical or electronic form and preserved fora minimum period of five years:Provided that where records are required to be duly signed and are maintained inelectronic form, such records shall be digitally signed.
19 (3) An investment adviser shall conduct yearly audit in respect of compliance with these
20 An investment adviser which is a body corporate or a partnership firm shall appoint a compliance officer who shall be responsible for monitoring the compliance by the investment adviser in respect of the requirements of the Act, regulations , notifications , guidelines , instructions issued by the Board.
21 (1) An investment adviser shall redress client grievances promptly .
21 (2) An investment adviser shall have adequate procedure for expeditious grievanceredressal.
21 (3) Client grievances pertaining to financial products in which investments have beenmade based on investment advice, shall fall within the purview of the regulator of suchfinancial product.
21 (4) Any dispute between the investment adviser and his client may be resolved througharbitration or through Ombudsman authorized or appointed for the purpose by anyregulatory authority , as applicable.34[Client level segregation of advisory and distribution activities.substitution, regulation 22 read as under; Segregation of execution services.22 Investment advisers which are banks , NBFCs and body corporate providing distribution or execution servicesto their client s shall keep their investment advisory services segregated from such activities:Provided that such distribution or execution services can only be offered subject to the following:(a) The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser .(b) The investment adviser shall maintain arms length relationship between its activities as investment adviser and distribution or execution services.
22 (1) An individual investment adviser shall not provide distribution services.
22 (2) The family of an individual investment adviser shall not provide distribution servicesto the client advised by the individual investment adviser and no individual investmentadviser shall provide advice to a client who is receiving distribution services from otherfamily members.
22 (3) A non-individual investment adviser shall have client level segregation at group levelfor investment advisory and distribution services.(i) The same client cannot be offered both advisory and distribution services within thegroup of the non-individual entity.(ii) A client can either be an advisory client where no distributor consideration isreceived at the group level or distribution services client where no advisory fee iscollected from the client at the group level.(iii) Group for this purpose shall mean an entity which is a holding, subsidiary,associate, subsidiary of a holding company to which it is also a subsidiary or an investingcompany or the venturer of the company as per the provisions of Companies Act , 2013for non-individual investment adviser which is a company under the said Act and in anyother case, an entity which has a controlling interest or is subject to the controllinginterest of a non-individual investment adviser.
22 (4) Non-individual investment adviser shall maintain an arm s length relationshipbetween its activities as investment adviser and distributor by providing advisory servicesthrough a separately identifiable department or division.
22 (5) Compliance and monitoring process for client segregation at group or family level
22A (1) Investment adviser may provide implementation services to the advisory clients in securities market: Provided that investment advisers shall ensure that no consideration including any commission or referral fees, whether embedded or indirect or otherwise, by whatever name called is received; directly or indirectly, at investment adviser s group or family level for the said service, as the case maybe.
22A (2) Investment adviser shall provide implementation services to its advisory clients only through direct schemes/products in the securities market .
22A (3) Investment adviser or group or family of investment adviser shall not charge any(c) All fees and charges paid to distribution or execution service providers by the client shall be paid directly tothe service providers and not through the investment adviser . 17implementation fees from the client .
23 The Board may suo motu or upon receipt of information or complaint appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents relating to investment advisers for any of the following reasons, namely: -(a)to ensure that the books of account, records and documents are being maintained bythe investment adviser in the manner specified in these regulations;to inspect into complaints received from clients or any other person, on any matterhaving a bearing on the activities of the investment adviser;to ascertain whether the provisions of the Act and these regulations are beingcomplied with by the investment adviser;to inspect into the affairs of a investment adviser, in the interest of the securitiesmarket or in the interest of investors .
24 (1) Before ordering an inspection under regulation 23, the Board shall give not lessthan ten days notice to the investment adviser.
24 (2) Notwithstanding anything contained in sub-regulation (1), where the Board issatisfied that in the interest of the investors no such notice should be given , it may by anorder in writing direct that the inspection of the affairs of the investment adviser be takenup without such notice.
24 (3) During the course of an inspection, the investment adviser against whom theinspection is being carried out shall be bound to discharge its obligations as provided inregulation 25.
25 (1)It shall be the duty of every investment adviser in respect of whom an inspectionhas been ordered under the regulation 23 and any other associate person who is inpossession of relevant information pertaining to conduct and affairs of such investmentadviser, including 36[partners, directors, principal officer and persons associated withinvestment advice], if any, to produce to the inspecting authority such books, accounts(Amendment) Regulations, 2020 and other documents in his custody or control and furnish him with such statements andinformation as the inspecting authority may require for the purposes of inspection.
25 (2)It shall be the duty of every investment adviser and any other associate person whois in possession of relevant information pertaining to conduct and affairs of theinvestment adviser to give to the inspecting authority all such assistance and shall extendall such co-operation as may be required in connection with the inspection and shallfurnish such information as sought by the inspecting authority in connection with theinspection.
25 (3) The inspecting authority shall, for the purposes of inspection, have power toexamine on oath and record the statement of any employees, directors, partners 37[,principal officer and persons associated with investment advice] or person responsiblefor or connected with the activities of investment adviser or any other associate personhaving relevant information pertaining to such investment adviser.
25 (4) The inspecting authority shall, for the purposes of inspection , have power to obtainauthenticated copies of documents, books, accounts of investment adviser, from any
26 The inspecting authority shall, as soon as possible, on completion of the inspection submit an inspection report to the Board : Provided that if directed to do so by the Board , the inspecting authority may submit an interim report.
27 The Board may after consideration of the inspection report and after giving reasonable opportunity of hearing to the investment advisers or its authorized representatives, issue such directions as it deems fit in the interest of securities market or the investors including,-(a) requiring an investment adviser 38[, partners, directors, principal officer and personsassociated with investment advice] not to provide investment advice for a particularperiod;(b) requiring the investment adviser to refund any money collected as fees, charges orcommissions or otherwise to the concerned clients along with the requisite interest.(c) prohibiting the investment adviser 39[, partners, directors, principal officer andpersons associated with investment advice] from operating in the capital market oraccessing the capital market for a specified period.
28 An investment adviser who -(a) contravenes any of the provisions of the Act or any regulations or circulars issuedthereunder;(b) fails to furnish any information relating to its activity as an investment adviser asrequired by the Board ;(c) furnishes to the Board information which is false or misleading in any materialparticular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry, inspection or investigation conducted by the Board ;(f) fails to resolve the complaints of investors or fails to give a satisfactory reply tothe Board in this behalf,shall be dealt with in the manner provided under the Securities and Exchange Board of
28A (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .
28A (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. 20 testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the
29 In order to remove any difficulties in the application or interpretation of these regulations , the Board may issue clarifications and guidelines in the form of circulars.
30 The Board reserves the right to alter, modify and overrule any decision, action taken or penalties imposed by the body or body corporate recognized under regulation 14.

Investment_Advisers_Jan11_2021

3 (1) On and from the commencement of these regulations, no person shall act as aninvestment adviser or hold itself out as an investment adviser unless he has obtained acertificate of registration from the Board under these regulations:9[***]10[(1A) Notwithstanding anything contained in sub-regulation (1), any application madeby a person prior to coming into force of these regulations containing such particulars oras near thereto as mentioned in Form A of First Schedule shall be treated as an applicationmade in pursuance of sub-regulation (1) and dealt with accordingly;]Advisers) (Amendment) Regulations, 2020,.omission, regulation 3(1) proviso read as under; Provided that a person acting as an investment adviser immediately before the commencement of theseregulations may continue to do so for a period of six months from such commencement or, if it has made anapplication for a certificate under sub-regulation (2) within the said period of six months, till the disposal of suchapplication. 4(2) An application for grant of certificate of registration shall be made in Form A asspecified in the First Schedule to these regulations and shall be accompanied by a non-refundable application fee to be paid in the manner specified in Second Schedule.11[(3) On and from the date of commencement of these regulations, no person, whiledealing in distribution of securities, shall use the nomenclature Independent FinancialAdviser or IFA or Wealth Adviser or any other similar name unless registered with the

4 The following persons shall not be required to seek registration under regulation 3 subject to the fulfillment of the conditions stipulated therefor, (a) Any person who gives general comments in good faith in regard to trends in thefinancial or securities market or the economic situation where such comments donot specify any particular securities or investment product;(b) Any insurance agent or insurance broker who offers investment advice solely ininsurance products and is registered with Insurance Regulatory and DevelopmentAuthority for such activity;(c) Any pension advisor who offers investment advice solely on pension products andis registered with Pension Fund Regulatory and Development Authority for suchactivity;(d) Any distributor of mutual funds, who is a member of a self regulatory organisationrecognised by the Board or is registered with an association of asset managementcompanies of mutual funds, providing any investment advice to its clients incidentalto its primary activity;(e) Any advocate, solicitor or law firm, who provides investment advice to their clients,incidental to their legal practise;(f) Any member of Institute of Chartered Accountants of India, Institute of CompanySecretaries of India, Institute of Cost and Works Accountants of India, ActuarialSociety of India or any other professional body as may be specified by the Board ,who provides investment advice to their clients, incidental to his professionalservice;(g) Any stock broker or sub-broker registered under SEBI (Stock Broker and Sub-Broker) Regulations, 1992, portfolio manager registered under SEBI (PortfolioManagers) Regulations, 1993 or merchant banker registered under SEBI (MerchantBankers) Regulations, 1992, who provides any investment advice to its clientsincidental to their primary activity:Provided that such intermediaries shall comply with the general obligation(s) andresponsibilities as specified in Chapter III of these regulations:5Provided further that existing portfolio manager offering only investment advisoryservices may apply for registration under these regulations after expiry of hiscurrent certificate of registration as a portfolio manager;(h) Any fund manager, by whatever name called of a mutual fund, alternativeinvestment fund or any other intermediary or entity registered with the Board ;(i) Any person who provides investment advice exclusively to clients based out ofIndia:Provided that persons providing investment advice to Non-Resident Indian orPerson of Indian Origin shall fall within the purview of these regulations;(j) Any 12[principal officer, persons associated with advice] and partner of aninvestment adviser which is registered under these regulations:Provided that such 13[principal officer, persons associated with advice] and partner shall comply with regulation 7 of these regulations;(k) Any other person as may be specified by the Board .

5 (1) The Board may require the applicant to furnish further information or clarificationregarding matters relevant to investment advisory services for the purpose ofconsideration of the application filed under sub-regulation (2) of regulation 3.

5 (2) The applicant or his authorised representative , if so required, shall appear beforethe Board for personal representation.

6 For the purpose of the grant of certificate the Board shall take into account all matters which are relevant to the grant of certificate of registration and in particular the following, namely, (a) whether the applicant is an individual or 14[a non-individual];15[(b) in case the applicant is an individual, he and all persons associated with investmentadvice are appropriately qualified and certified as specified in regulation 7;.13 Regulations, 2020,.substitution, clause (b) read as under ; whether in case the applicant is an individual, he is appropriately qualified and certified as specified in regulation7; .616[(c) in case the applicant is a body corporate, the principal officer and all personsassociated with investment advice of the applicant are appropriately qualified andcertified as specified in regulation 7;]17[(d) in case the applicant is a firm or a limited liability partnership, the principal officerand all persons associated with investment advice of the applicant are appropriatelyqualified and certified as specified in regulation 7;](e) whether the applicant fulfills the 18[networth] requirements as specified in regulation8;19[(f) whether the applicant , its partners, principal officer and persons associated withinvestment advice, if any, are fit and proper persons based on the criteria asspecified in Schedule II of the Securities and Exchange Board of India(Intermediaries) Regulations, 2008;](g) whether the applicant has the necessary infrastructure to effectively discharge theactivities of an investment adviser;(h) whether the applicant or any person directly or indirectly connected with the applicant has in the past been refused certificate by the Board and if so, the groundsfor such refusal;(i) whether any disciplinary action has been taken by the Board or any other regulatoryauthority against any person directly or indirectly connected to the applicant under the respective Act, rules or regulations made there under ;(j)(k)In case a bank or an NBFC proposes to under take investment advisory services,whether it has been permitted by Reserve Bank of India and the application is madethrough a subsidiary or separately identifiable department or division;In case any 20[non-individual], other than a Bank or NBFC, which proposes to under take investment advisory services, whether, the application is made througha separately identifiable department or division;substitution, clause (c) read as under ; whether in case the applicant is a body corporate, all the representatives of the applicant who provide investmentadvice are appropriately qualified and certified as specified in regulation 7; substitution, clause (d) read as under ; whether in case the applicant is a firm or a limited liability partnership, all partners who are engaged in givinginvestment advice are qualified and certified as specified in regulation 7; 2020,.substitution, clause (f) read as under ; whether the applicant , its representatives and partners, if any, are fit and proper persons based on the criteria asspecified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; 2020,.7(l)In case an entity incorporated outside India under takes to provide investmentadvisory services under these regulations, whether, it has set up a subsidiary inIndia and whether such subsidiary has made the application for registration;(m) In case a foreign citizen proposes to under take investment advisory services,whether the applicant has set up an office in India and proposes to under takeinvestment advisory services through such office;21[(n)Whether the applicant is a member of a recognized body or body corporate asspecified under regulation 14:Provided that the existing investment advisers shall comply with the requirement

7 (1) An individual investment adviser or a principal officer of a non-individual investmentadviser registered as an investment adviser under these regulations, shall have thefollowing minimum qualification, at all times -(a) A professional qualification or post-graduate degree or post graduate diploma(minimum two years in duration) in finance, accountancy, business management,commerce, economics, capital market, banking, insurance or actuarial science fromsubstitution, regulation 7 read as under; Qualification and certification requirement.An individual registered as an investment adviser under these regulations and partners and7(1)representatives of an investment adviser registered under these regulations offering investment advice shall havethe following minimum qualifications, at all times:(a)A professional qualification or post-graduate degree or post graduate diploma in finance,accountancy, business management, commerce, economics, capital market, banking, insurance oractuarial science from a university or an institution recognized by the central government or any stategovernment or a recognised foreign university or institution or association; or(b) A graduate in any discipline with an experience of at least five years in activities relating to advice infinancial products or securities or fund or asset or portfolio management.

7 (2)An individual registered as an investment adviser and partners and representatives of investmentadvisers registered under these regulations offering investment advice shall have, at all times, a certification onfinancial planning or fund or asset or portfolio management or investment advisory services:(a)(b)from NISM; orfrom any other organization or institution including Financial Planning Standards Board India or anyrecognized stock exchange in India provided that such certification is accredited by NISM.:Provided that the existing investment advisers seeking registration under these regulations shall ensure that theirpartners and representatives obtain such certification within two years from the date of commencement of these regulations :Provided further that fresh certification must be obtained before expiry of the validity of the existing certificationto ensure continuity in compliance with certification requirements. 8a university or an institution recognized by the Central Government or any StateGovernment or a recognised foreign university or institution or association or aCFA Charter from the CFA Institute;(b) An experience of at least five years in activities relating to advice in financialproducts or securities or fund or asset or portfolio management;(c) Persons associated with investment advice shall meet the following minimumqualifications, at all times -(i) a professional qualification as provided in clause (a) of sub-regulation (1) ofregulation 7; and(ii) an experience of at least two years in activities relating to advice in financialproducts or securities or fund or asset or portfolio management:Provided that investment advisers registered under these regulations as on the dateof commencement of these regulations shall ensure that the individual investmentadviser or principal officer of a non-individual investment adviser registered underthese regulations and persons associated with investment advice comply with suchqualification and experience requirements within three years:Provided further that the requirements at clauses (a) and (b) shall not apply to suchexisting individual investment advisers as may be specified by the Board.

7 (2) An individual investment adviser or principal officer of a non-individual investmentadviser, registered under these regulations and persons associated with investment adviceshall have, at all times a certification on financial planning or fund or asset or portfoliomanagement or investment advisory services -(a)from NISM; or(b)from any other organization or institution including Financial Planning StandardsBoard of India or any recognized stock exchange in India provided such certificationis accredited by NISM:Provided that fresh certification must be obtained before expiry of the validity of theexisting certification to ensure continuity in compliance with certification requirements:Provided further that fresh certification before expiry of the validity of the existingcertification shall not be obtained through a CPE program.]23[Networth.substitution, regulation 8 read as under; Capital adequacy.(1) Investment advisers which are body corporate shall have a net worth of not less than twenty five lakh rupees.plus free reserves (excluding reserves created out of revaluation) reduced by the aggregate value of accumulatedlosses, deferred expenditure not written off, including miscellaneous expenses not written off, and capital

8 (1) Investment advisers who are non-individuals shall have a net worth of not less thanfifty lakh rupees.of paid up share capital plus free reserves (excluding reserves created out of revaluation)reduced by the aggregate value of accumulated losses, deferred expenditure not writtenoff, including miscellaneous expenses not written off, and networth requirement for otherservices offered by the advisers in accordance with the applicable rules and regulations .

8 (2) Investment advisers who are individuals shall have net tangible assets of value notless than five lakh rupees:Provided that existing investment advisers shall comply with the networth requirementwithin three years from the date of commencement of the SEBI (Investment Advisers)(Amendment) Regulations, 2020.]

9 The Board on being satisfied that the applicant complies with the requirements specified in regulation 6 shall send intimation to the applicant and on receipt of the payment of registration 24[***] fees as specified in Second Schedule, grant certificate of registration in Form B under First Schedule, subject to such terms and conditions as the Board may deem fit and appropriate.

10 The certificate of registration granted under regulation 9 shall be valid 25[till it is suspended or cancelled by the Board.]

11 26[The investment adviser which has already been granted certificate of registration by the Board, prior to the commencement of the Securities and Exchange Board of India adequacy requirement for other services offered by the advisers in accordance with the applicable rules andregulations.

11 (2) Investment advisers who are individuals or partnership firms shall have net tangible assets of value not lessthan rupees one lakh:Provided that existing investment advisers shall comply with the capital adequacy requirement within one yearfrom the date of commencement of these regulations. Registration of Certain Intermediaries) (Amendment) Regulations, 2016 w.e.f. 08-12-2016.Board of India (Change in Conditions of Registration of Certain Intermediaries) (Amendment) Regulations, 2016w.e.f. 08-12-2016.Intermediaries) (Amendment) Regulations, 2016. Prior to substitution regulation 11 read asunder: 11. (1) Three months before the expiry of the period of validity of the certificate, the investment adviser may, ifhe so desires, make an application in Form A for grant of renewal of certificate of registration.

11 (2)The application for renewal under sub-regulation (1) shall be dealt with in the same manner as if it were anapplication made under sub-regulation (2) of regulation 3 for grant of certificate. 10(Change in Conditions of Registration of Certain Intermediaries) (Amendment)Regulations, 2016 shall be deemed to have been granted a certificate of registration, interms of sub-regulation (1).]

12 (1) After considering an application made under regulation 3, if the Board is of theopinion that a certificate should not be granted to the applicant , it may reject theapplication after giving the applicant a reasonable opportunity of being heard.

12 (2) The decision of the Board to reject the application shall be communicated to theapplicant within thirty days of such decision.

12 (3) Where an application for a certificate is rejected by the Board , the applicant shallforthwith cease to act as an investment adviser:Provided that nothing contained in this regulation shall affect the liability of the applicant towards its existing clients under law.

13 The certificate granted under regulation 9 shall, inter alia, be subject to the following conditions:-(a)(b)the investment adviser shall abide by the provisions of the Act and these regulations;the investment adviser shall forthwith inform the Board in writing, if anyinformation or particulars previously submitted to the Board are found to be falseor misleading in any material particular or if there is any material change in theinformation already submitted;(c)the investment adviser, not being an individual, shall include the words investmentadviser in its name:Provided that if the investment advisory service is being provided by a separatelyidentifiable department or division or a subsidiary, then such separately identifiabledepartment or division or subsidiary shall include the words investment adviser inits name;(d)individuals registered as investment advisers shall use the term investment adviser in all their correspondences with their clients27[;]28[(e) individuals registered as investment advisers whose number of clients exceed onehundred and fifty in total, shall apply for registration as non-individual investment adviserwithin such time as may be specified by the Board.]09-2020.11

14 (1) The Board may recognize any body or body corporate for the purpose of regulatinginvestment advisers.

14 (2) The Board may, at the time of recognition of such body or body corporate , delegateadministration and supervision of investment advisers to such body or body corporate onsuch terms and conditions as may be specified by the Board.

14 (3) The Board may specify that no person shall act as an investment adviser unless heis a member of a recognized body or body corporate and in such event, provisions ofthese regulations and byelaws or articles of such body or body corporate shall apply

15 (1) An investment adviser shall act in a fiduciary capacity towards its clients and shalldisclose all conflicts of interests as and when they arise.

15 (2)An investment adviser shall not receive any consideration by way of remunerationor compensation or in any other form from any person other than the client being advised,in respect of the underlying products or securities for which advice is provided.

15 (3) An investment adviser shall maintain an arms-length relationship between itsactivities as an investment adviser and other activities.

15 (4) An investment adviser which is also engaged in activities other than investmentadvisory services shall ensure that its investment advisory services are clearly segregatedfrom all its other activities, in the manner as prescribed hereunder.

15 (5) An investment adviser shall ensure that in case of any conflict of interest of theinvestment advisory activities with other activities, such conflict of interest shall bedisclosed to the client .

15 (6) An investment adviser shall not divulge any confidential information about itsclient, which has come to its knowledge, without taking prior permission of its clients,except where such disclosures are required to be made in compliance with any law forthe time being in force.

15 (7) An investment advisor shall not enter into transactions on its own account which iscontrary to its advice given to client s for a period of fifteen days from the day of suchadvice.Provided that during the period of such fifteen days, if the investment adviser is of theopinion that the situation has changed, then it may enter into such a transaction on its ownaccount after giving such revised assessment to the client at least 24 hours in advance ofentering into such transaction.

15 (8) An investment advisor shall follow Know Your Client procedure as specified bythe Board from time to time.

15 (9) An investment adviser shall abide by Code of Conduct as specified in ThirdSchedule.

15 (10)An investment adviser shall not act on its own account, knowingly to sellsecurities or investment products to or purchase securities or investment product from aclient.

15 (11) In case of change in control of the investment adviser, prior approval from the Boardshall be taken.

15 (12) Investment advisers shall furnish to the Board information and reports as may bespecified by the Board from time to time.

15 (13) It shall be the responsibility of the investment adviser to ensure compliance withthe certification and qualification requirements as specified under Regulation 7 at all times.

15A Investment Adviser shall be entitled to charge fees for providing investment advice from a client in the manner as specified by the Board.]

16 Investment adviser shall ensure that,-(a) it obtains from the client , such information as is necessary for the purpose of givinginvestment advice, including the following:-(i) age;(ii) investment objectives including time for which they wish to stay invested, thepurposes of the investment ;(iii) income details;(iv ) existing investments/ assets;(v) risk appetite/ tolerance;(vi) liability/borrowing details.(b) it has a process for assessing the risk a client is willing and able to take, including:substitution, sub-regulation (13) read as under; (13) It shall be the responsibility of the Investment Adviser to ensure that its representatives and partners, asapplicable, comply with the certification and qualification requirements under Regulation 7 at all times. 13(i) assessing a client s capacity for absorbing loss;(ii) identifying whether client is unwilling or unable to accept the risk of loss ofcapital;(iii) appropriately interpreting client responses to questions and not attributinginappropriate weight to certain answers.(c) where tools are used for risk profiling, it should be ensured that the tools are fit forthe purpose and any limitations are identified and mitigated;(d) any questions or description in any questionnaires used to establish the risk a client is willing and able to take are fair, clear and not misleading, and should ensure that:(i) questionnaire is not vague or use double negatives or in a complex languagethat the client may not understand;(ii) questionnaire is not structured in a way that it contains leading questions.(e) risk profile of the client is communicated to the client after risk assessment is done;(f)

17 Investment adviser shall ensure that,-(a) All investments on which investment advice is provided is appropriate to the riskprofile of the client ;(b) It has a documented process for selecting investments based on client s investmentobjectives and financial situation;(c) It understands the nature and risks of products or assets selected for client s;(d) It has a reasonable basis for believing that a recommendation or transaction enteredinto:(i) meets the client s investment objectives;(ii)is such that the client is able to bear any related investment risks consistentwith its investment objectives and risk tolerance;(iii) is such that the client has the necessary experience and knowledge tounderstand the risks involved in the transaction.(e) Whenever a recommendation is given to a client to purchase of a particular complexfinancial product, such recommendation or advice is based upon a reasonableassessment that the structure and risk reward profile of financial product is consistentwith client s experience, knowledge, investment objectives, risk appetite and capacity

18 (1) An investment adviser shall disclose to a prospective client , all materialinformation about itself including its business, disciplinary history, the terms and14conditions on which it offers advisory services, affiliations with other intermediaries andsuch other information as is necessary to take an informed decision on whether or not toavail its services.31[***](4) An investment adviser shall disclose to the client its holding or position, if any, inthe financial products or securities which are subject matter of advice.

18 (5) An investment adviser shall disclose to the client any actual or potential conflictsof interest arising from any connection to or association with any issuer of products/securities, including any material information or facts that might compromise itsobjectivity or independence in the carrying on of investment advisory services.

18 (6) An investment adviser shall, while making an investment advice, make adequatedisclosure to the client of all material facts relating to the key features of the products orsecurities , particularly, performance track record.

18 (7) An investment adviser shall draw the client s attention to the warnings, disclaimersin documents, advertising materials relating to an investment product which it isrecommending to the client .

19 (1) An investment adviser shall maintain the following records,-(a) Know Your Client records of the client ;(b ) Risk profiling and risk assessment of the client ;(c) Suitability assessment of the advice being provided;32[(d ) Copies of agreements with client s, incorporating the terms and conditions asmay be specified by the Board;](e) Investment advice provided, whether written or oral;(f) Rationale for arriving at investment advice, duly signed and dated;omission, sub-regulation (2) and (3) read as under; (2) An investment adviser shall disclose to its client , any consideration by way of remuneration or compensationor in any other form whatsoever, received or receivable by it or any of its associates or subsidiaries for anydistribution or execution services in respect of the products or securities for which the investment advice isprovided to the client .

19 (3) An investment adviser shall, before recommending the services of a stock broker or other intermediary to aclient, disclose any consideration by way of remuneration or compensation or in any other form whatsoever, ifany, received or receivable by the investment adviser, if the client desires to avail the services of such intermediary . substitution, clause (d) read as under; (d)Copies of agreements with clients, if any; 15(g) A register or record containing list of the clients, the date of advice, nature ofthe advice, the products/securities in which advice was rendered and fee, if anycharged for such advice.

19 (2) All records shall be maintained either in physical or electronic form and preserved fora minimum period of five years:Provided that where records are required to be duly signed and are maintained inelectronic form, such records shall be digitally signed.

19 (3) An investment adviser shall conduct yearly audit in respect of compliance with these

20 An investment adviser which is a body corporate or a partnership firm shall appoint a compliance officer who shall be responsible for monitoring the compliance by the investment adviser in respect of the requirements of the Act, regulations , notifications , guidelines , instructions issued by the Board.

21 (1) An investment adviser shall redress client grievances promptly .

21 (2) An investment adviser shall have adequate procedure for expeditious grievanceredressal.

21 (3) Client grievances pertaining to financial products in which investments have beenmade based on investment advice, shall fall within the purview of the regulator of suchfinancial product.

21 (4) Any dispute between the investment adviser and his client may be resolved througharbitration or through Ombudsman authorized or appointed for the purpose by anyregulatory authority , as applicable.34[Client level segregation of advisory and distribution activities.substitution, regulation 22 read as under; Segregation of execution services.22 Investment advisers which are banks , NBFCs and body corporate providing distribution or execution servicesto their client s shall keep their investment advisory services segregated from such activities:Provided that such distribution or execution services can only be offered subject to the following:(a) The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser .(b) The investment adviser shall maintain arms length relationship between its activities as investment adviser and distribution or execution services.

22 (1) An individual investment adviser shall not provide distribution services.

22 (2) The family of an individual investment adviser shall not provide distribution servicesto the client advised by the individual investment adviser and no individual investmentadviser shall provide advice to a client who is receiving distribution services from otherfamily members.

22 (3) A non-individual investment adviser shall have client level segregation at group levelfor investment advisory and distribution services.(i) The same client cannot be offered both advisory and distribution services within thegroup of the non-individual entity.(ii) A client can either be an advisory client where no distributor consideration isreceived at the group level or distribution services client where no advisory fee iscollected from the client at the group level.(iii) Group for this purpose shall mean an entity which is a holding, subsidiary,associate, subsidiary of a holding company to which it is also a subsidiary or an investingcompany or the venturer of the company as per the provisions of Companies Act , 2013for non-individual investment adviser which is a company under the said Act and in anyother case, an entity which has a controlling interest or is subject to the controllinginterest of a non-individual investment adviser.

22 (4) Non-individual investment adviser shall maintain an arm s length relationshipbetween its activities as investment adviser and distributor by providing advisory servicesthrough a separately identifiable department or division.

22 (5) Compliance and monitoring process for client segregation at group or family level

22A (1) Investment adviser may provide implementation services to the advisory clients in securities market: Provided that investment advisers shall ensure that no consideration including any commission or referral fees, whether embedded or indirect or otherwise, by whatever name called is received; directly or indirectly, at investment adviser s group or family level for the said service, as the case maybe.

22A (2) Investment adviser shall provide implementation services to its advisory clients only through direct schemes/products in the securities market .

22A (3) Investment adviser or group or family of investment adviser shall not charge any(c) All fees and charges paid to distribution or execution service providers by the client shall be paid directly tothe service providers and not through the investment adviser . 17implementation fees from the client .

23 The Board may suo motu or upon receipt of information or complaint appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, records and documents relating to investment advisers for any of the following reasons, namely: -(a)to ensure that the books of account, records and documents are being maintained bythe investment adviser in the manner specified in these regulations;to inspect into complaints received from clients or any other person, on any matterhaving a bearing on the activities of the investment adviser;to ascertain whether the provisions of the Act and these regulations are beingcomplied with by the investment adviser;to inspect into the affairs of a investment adviser, in the interest of the securitiesmarket or in the interest of investors .

24 (1) Before ordering an inspection under regulation 23, the Board shall give not lessthan ten days notice to the investment adviser.

24 (2) Notwithstanding anything contained in sub-regulation (1), where the Board issatisfied that in the interest of the investors no such notice should be given , it may by anorder in writing direct that the inspection of the affairs of the investment adviser be takenup without such notice.

24 (3) During the course of an inspection, the investment adviser against whom theinspection is being carried out shall be bound to discharge its obligations as provided inregulation 25.

25 (1)It shall be the duty of every investment adviser in respect of whom an inspectionhas been ordered under the regulation 23 and any other associate person who is inpossession of relevant information pertaining to conduct and affairs of such investmentadviser, including 36[partners, directors, principal officer and persons associated withinvestment advice], if any, to produce to the inspecting authority such books, accounts(Amendment) Regulations, 2020 and other documents in his custody or control and furnish him with such statements andinformation as the inspecting authority may require for the purposes of inspection.

25 (2)It shall be the duty of every investment adviser and any other associate person whois in possession of relevant information pertaining to conduct and affairs of theinvestment adviser to give to the inspecting authority all such assistance and shall extendall such co-operation as may be required in connection with the inspection and shallfurnish such information as sought by the inspecting authority in connection with theinspection.

25 (3) The inspecting authority shall, for the purposes of inspection, have power toexamine on oath and record the statement of any employees, directors, partners 37[,principal officer and persons associated with investment advice] or person responsiblefor or connected with the activities of investment adviser or any other associate personhaving relevant information pertaining to such investment adviser.

25 (4) The inspecting authority shall, for the purposes of inspection , have power to obtainauthenticated copies of documents, books, accounts of investment adviser, from any

26 The inspecting authority shall, as soon as possible, on completion of the inspection submit an inspection report to the Board : Provided that if directed to do so by the Board , the inspecting authority may submit an interim report.

27 The Board may after consideration of the inspection report and after giving reasonable opportunity of hearing to the investment advisers or its authorized representatives, issue such directions as it deems fit in the interest of securities market or the investors including,-(a) requiring an investment adviser 38[, partners, directors, principal officer and personsassociated with investment advice] not to provide investment advice for a particularperiod;(b) requiring the investment adviser to refund any money collected as fees, charges orcommissions or otherwise to the concerned clients along with the requisite interest.(c) prohibiting the investment adviser 39[, partners, directors, principal officer andpersons associated with investment advice] from operating in the capital market oraccessing the capital market for a specified period.

28 An investment adviser who -(a) contravenes any of the provisions of the Act or any regulations or circulars issuedthereunder;(b) fails to furnish any information relating to its activity as an investment adviser asrequired by the Board ;(c) furnishes to the Board information which is false or misleading in any materialparticular;(d) does not submit periodic returns or reports as required by the Board ;(e) does not co-operate in any enquiry, inspection or investigation conducted by the Board ;(f) fails to resolve the complaints of investors or fails to give a satisfactory reply tothe Board in this behalf,shall be dealt with in the manner provided under the Securities and Exchange Board of

28A (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .

28A (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuous basis. 20 testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the

29 In order to remove any difficulties in the application or interpretation of these regulations , the Board may issue clarifications and guidelines in the form of circulars.

30 The Board reserves the right to alter, modify and overrule any decision, action taken or penalties imposed by the body or body corporate recognized under regulation 14.