Obligation of an Investment Advisor - Swastika Swastika
Obligations of an Investment Advisor

Obligation of an Investment Advisor

SEBI notified the SEBI (Investment Advisers) Regulation, 2013 in January 2013 intending to regulate the activity of providing investment advisory services in various forms by independent financial advisors, distributors, banks, and other such entities. The regulations become effective from April 2013.

General Obligations of Investment Advisers

The relationship between the investment adviser and client is that of trust and the investment adviser while performing his role, should act in good faith in the best interests of the client. The Investment Adviser Regulations have cast upon investment advisers certain obligations and responsibilities while providing investment advisory services.

Conflicts of Interest

It is important that the investment adviser discloses all conflicts of interest to the client as and when they arise.

Only Advisory Earnings

An investment adviser must not receive any remuneration from anyone except the client in respect of securities or investment products for which he has provided advice.

Differentiation of Activities

There must be segregation of other business activities from investment advisory activity of the investment advisor. A professional relationship must be maintained between investment advisory activity and such other activities. If a conflict of interest arises, the same shall be disclosed to the client.

Confidentiality

The investment adviser must maintain strict confidentiality with respect to the information received from the client.

Compliance

An investment advisor shall follow Know Your Client procedure as specified by SEBI from time to time.

Code of Conduct

An investment adviser must abide by the Code of Conduct as specified in the Third Schedule of the Investment Adviser Regulations.

Reporting to SEBI

The investment adviser must file periodic reports or information to SEBI as may be required from time to time and take prior approval from SEBI if there is a change in control of the investment adviser.

Certification

It shall be the responsibility of the Investment Adviser to ensure that its representatives and partners comply with the certification stipulated by the Investment Adviser Regulations at all times.

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