THE GAZETTE OF INDIA
EXTRAORDINARY
PART – III – SECTION 4
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
SECURITIES AND EXCHANGE BOARD OF INDIA
(INVESTMENT ADVISERS) REGULATIONS, 2007
F. No. . In exercise of the powers conferred by section 30, read with clause (b) of sub-section (2) of section 11 and sub-section (1) of section 12, of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Board hereby makes the following Regulations, namely: -
CHAPTER I
PRELIMINARY
Short title and commencement
1.
(1) These Regulations may be called the Securities and Exchange Board of India (Investment Advisers) Regulations, 2007.
They shall come into force on such date as may be specified by the Board by notification in the Official Gazette.
Definitions.
2.
(1) In these Regulations, unless the context otherwise requires, -
(a) ‘Act’ means the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(b) ‘Board’ means the Securities and Exchange Board of India established under section 3 of the Act;
(c) ‘certificate’ means a certificate of registration granted under these regulations;
(d) ‘self-regulatory organization’ means any self-regulatory organization which is recognised by the Board under regulation 5 of the Securities and Exchange Board of India (Self Regulatory Organisations) Regulations, 2004 or any statutory amendment or re-enactment thereof;
(2) Words and expressions not defined in these Regulations, but defined in or under the Act or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956, or any statutory modification or re-enactment thereof, shall have the same meaning as have been assigned to them by or under those enactments.
Investment adviser.
3.
(1) For the purposes of these regulations, ‘investment adviser’ means any person who for consideration is engaged in the business of providing investment advice to others, either directly or through publications or writings or electronic mails, or who, for consideration and as part of regular business, issues or publishes reports or analyses containing investment advice and includes any person who holds himself out as an investment adviser (by whatever name called) to others.
(2) For the purposes of sub-regulation (1) and unless the context otherwise requires, other provisions of these regulations –
(a) ‘investment advice’ means advise as to value of securities, or as to the advisability of investing in, purchasing, selling or otherwise dealing in securities;
(b) ‘consideration’ means any form of economic benefit, and includes non-cash consideration in any form whatsoever, whether received or receivable directly or indirectly from any person;
(c) a person shall be deemed not to be engaged in the business of providing investment advice, if –
(i) the advice is solely incidental to some other business or profession and the advice is given only to clients of the person in the course of such other business or profession; and
(ii) the advice does not specify particular securities;
(3) Notwithstanding anything contained in sub-regulation (2), any advice given in writing or other legible form shall not be construed as ‘investment advice’ if the advice is contained in a newspaper, journal, magazine or other periodical publication and if the principal purpose of the publication, taken as a whole and including any advertisements or other promotional material contained therein is neither –
(a) that of providing ‘investment advice’ within the meaning of clause (a) of sub-regulation (2); nor
(b) that of soliciting, leading or enabling persons to buy, sell or otherwise deal in securities.
(4) Notwithstanding anything contained in sub-regulation (2), any advice given in any service consisting of radio broadcast or television transmission or a similar service in the internet or other electronic media shall not be construed as ‘investment advice’ if the principal purpose of the service, taken as a whole and including any advertisements or other promotional material contained therein is neither -
(a) that of providing ‘investment advice’ within the meaning of clause (a) of sub-regulation (2); nor
(b) that of soliciting, leading or enabling persons to buy, sell or otherwise deal in securities.
CHAPTER II
REGISTRATION OF INVESTMENT ADVISERS
Certificate of Registration.
4.
(1) On and from the commencement of these regulations, no person shall act as an investment adviser or hold himself out as an investment adviser unless he has a certificate:
Provided that a person acting as an investment adviser immediately before the commencement of these regulations may continue to do so for a period of six months from such commencement or, if he has made an application for a certificate under sub-regulation (3) within the said period of three months, till the disposal of such application.
(2) Notwithstanding anything contained in sub-regulation (1), a person who is holding a certificate granted by the Board under section 12 of the Act in any other capacity may provide investment advice to his clients in that capacity without obtaining a separate certificate under these regulations:
Provided that any person acting as an investment adviser under this sub-regulation shall comply with all other provisions of these regulations:
(3) No certificate shall be granted to any person under these regulations, unless he is a member of a self-regulatory organization.
(4) An application for grant of certificate shall be made in in such format as may be specified by the Board.
(5) The application shall be made to the self-regulatory organization of which the applicant is a member and forwarded by the self-regulatory organization to the Board with its recommendations in such format as may be specified by the Board.
(6) Where it is so decided, the Board shall grant a certificate to the applicant in such form as may be specified by the Board.
(7) Without prejudice to the powers of the Board to take any action under the Act or regulations made thereunder, the certificate shall be valid till the investment adviser continues to be a member of the self-regulatory organization on whose recommendation the certificate was granted.
Procedure where registration is refused.
5.
(1) Where the Board is of the prima facie opinion that a certificate ought not to be granted to the applicant, it shall afford an opportunity of hearing to the applicant before taking a final decision.
(2) Where an application for a certificate is rejected by the Board, the order of rejection shall be communicated to the applicant as soon as may be.
(3) Where an application for a certificate is rejected by the Board, the applicant shall forthwith 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.
CHAPTER III
GENERAL OBLIGATIONS AND RESPONSIBILITIES
General obligations of an investment adviser.
6.
(1) An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise or seem likely.
(2) An investment adviser shall not divulge to anybody, either orally or in writing, directly or indirectly, any confidential information about its clients, 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 for the time being in force.
Disclosures to clients
7.
(1) An investment adviser shall disclose to a prospective client all material information about itself, its business, its disciplinary history, the terms and conditions on which it offers advisory services, its affiliations with other intermediaries and such other information as is necessary him to take an informed decision on whether to avail its services.
(2) Before recommending a security, an investment adviser shall disclose all commissions and rewards, if any, that it will receive if the client chooses the recommended security.
(3) Before recommending the services of a stock broker or other intermediary to a client, an investment adviser shall disclose all commission and rewards, if any, that it will receive if the client chooses to avail the services of such intermediary.
Duty to comply with rules and bye-laws of self regulatory organization.
8.
An investment adviser shall comply with the bye-laws, rules and governing norms of every self-regulatory organization of which it is a member.
CHAPTER IV
PROCEDURE FOR ACTION IN CASE OF DEFAULT
Liability for action in case of default.
9.
(1) A investment adviser who -
(a) contravenes any of the provisions of the Act, rules or regulations; or
(b) contravenes any provision of the bye-laws of the self-regulatory organization of which it is a member -
may be dealt with in the manner provided under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer) Regulations, 2002.
(2) Sub-regulation (1) shall not prejudice the operation of sections 11, 11B, 11D or 24 or Chapter VIA of the Act or of any other law for the time being in force.
CHAPTER V
MISCELLANEOUS
Power of the Board to issue clarifications.
9.
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.
Delegation of powers
10.
The powers exercisable by the Board under these regulations shall also be exercisable by any officer of the Board to whom such powers are delegated by the Board by means of an order made under section 19 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).
Amendment of other regulations.
11.
On and from the commencement of these regulations, the regulations mentioned in the Schedule shall stand amended to the extent mentioned therein.
Schedule
Amendment to other Regulations
A. Amendment to the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993
1. In regulation 2, in clause (cb), the words “advises or” occurring after the words “contract or arrangement with a client” shall be omitted.
2. In regulation 16B, for sub-regulation (2), the following sub-regulation shall be substituted, namely:-
“(2) Nothing contained in this regulation shall apply to a portfolio manager who has total assets under management of value less than five hundred crore rupees.”
B. Amendment to the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002
1. In regulation 4, after clause (s), the following clause shall be inserted, namely:-
“(t) the Securities and Exchange Board of India (Investment Advisers) Regulations, 2007.
No comments:
Post a Comment