Graduates from any discipline, including engineering and law, could become investment advisers and research analysts as India’s capital market regulator unveiled sweeping proposals to slash red tape and widen entry for such professionals.
The Securities and Exchange Board of India’s consultation paper released on Thursday proposes to drop subject restrictions for new entrants. The only mandatory hurdle is clearing the relevant National Institute of Securities Markets (NISM) exams or an accredited equivalent.
The paper seeks to overhaul compliance, registration, and data disclosure requirements for such investment advisers (IAs) or research analysts (RAs). It aims to “facilitate ease of doing business and address practical challenges in the current framework”, following persistent demands from the industry, it said.
Open to comments
The paper is open for public comments until 28 August.
“Why should an engineering graduate not be any better than an economics graduate after having created the required examination for licence?” said Harsh Roongta, member of the Sebi Alternative Investment Policy Advisory Committee (AIPAC) and founder of Fee Only Investment Advisers LLP.
Once an aspirant clears the key criteria of NISM Series X-A and X-B examination before getting a licence, all candidates should be treated equally, Roongta said. These examinations are mandatory qualification exams prescribed by Sebi for investment advisers in India.
Sebi also intends to allow IAs and RAs to share past performance data with clients, a long-standing demand. However, this can only be done on a specific client’s request and must be certified by a chartered accountant, company secretary, or cost accountant, rather than being disseminated publicly. Once Sebi’s new Past Risk and Return Verification Agency (PaRRVA) is fully operational, only PaRRVA-certified performance metrics can be used for advertising or disclosure purposes.
Another significant change would let IAs provide second opinions and charge fees for assets purchased via other distributors, provided the investor is fully informed and gives annual consent. The intent, according to Sebi, is to ensure investors are not deprived of independent advice simply due to prior distributor relationships.
Streamlining entry
To streamline entry, Sebi proposes scrapping requirements for multiple address proofs and detailed infrastructure documentation, noting that most players now operate virtually. Applicants will now only need to declare infrastructure adequacy and provide basic contact details.
The paper seeks to eliminate the requirement for submitting CIBIL credit scores, net worth, asset and liability statements, and income tax returns. Sebi explained: “The requirement to submit the credit report/score from CIBIL is hence redundant for determining the eligibility of the applicant for registration and removal of this requirement shall reduce the compliance burden for applicants.”
Sebi also proposes to give individual IAs a more flexible timeline to convert into corporate entities after crossing 300 clients or ₹3 crore in annual fees. Advisers will, for the first time, be able to onboard clients and collect fees during the process—minimizing business disruption.
While these proposals mark significant progress, experts caution that more structural changes may be required to substantially grow the pool of registered advisers and analysts. “There is a big need for a graded regulatory structure. The number otherwise is going to fall,” said an industry observer.
