Queries –

(a) Can a non individual Investment Adviser becoming Authorized Person (AP) of a Trading Member give Investment Advisory clients implementation / execution services?

SEBI Response –

With response to above query it is informed that

As per Regulation 15(2) of SEBI (Investment Adviser) Regulations 2013 –

(i) “An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, inrespect of the underlying products or securities for which advice is provided.”

(ii) Further, Regulation 22A of SEBI (Investment Adviser) Regulations 2013 provides as under

(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. 

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

(iii) Is is thus seen that there is restriction under SEBI (Investment Adviser) Regulations, 2013 for a registered IA to charge any implementation fee from its clients at IA’s group or family level. Further, as per the SEBI (Investment Adviser) Regulations, 2013, the IAs cannot receive any consideration, by whatsoever name called, whether directly or indirectly, at IA’s group or family level for the said implementation service given.

(iv) In the instant matter, VCPL has submitted that apart from being an IA, it is also an authorised person (AP) of trading member Sharekhan Ltd. As per SEBI (Investment Advisers) Regulations 2013, while VCPL can provide implementation services to its advisory clients, it cannot receive any direct or indirect consideration neither from its clients nor any other entity for such implementation services at any point of time including the investment advisory service period.

(b) Investment Adviser due to any unavoidable situation receive brokerage / commission sharing of Investment Advisory clients from SEBI registered intermediary then what would he should do with that amount?

Investment Adviser should return that brokerage/ commission amount to SEBI registered intermediary OR

If SEBI permits, then such amount can be deposited in SEBI established Investor Protection and Education Fund (IPEF)/ any stock exchange managed Investor Protection Fund. So that this will help in complying with the SEBI (Investment Advisers) Regulations

SEBI Response –

It is informed that the query raised by VCPL is in the form of seeking opinion, is hypothetical in nature and does not cite the relevant legal provisions. Hence the same cannot be covered under the SEBI (Informal Guidance) Scheme 2003.