The SEBI (Securities and Exchange Board of India)has finalised new rules for regulating investment advisers on the lines of the structure in the mutual fund industry to prevent growing complaints from investors about being short changed.
In 2010, December , a Rs. 300-crore fraud was reported in Citibank's Gurgaon branch as one of its relationship managers sold high-return schemes to HNI customers. The SEBI's concern is that since financial products are long-term in nature, investors are often left in the lurch when relationship managers switch jobs. SEBI plans to mandate individual and institutional agents to maintain records of their communication with investors as it will establish an audit trail.
SEBI thinks maintaining records will help as one can hold institutions responsible even if its relationship managers move on," said the person. Since investment advisers advice on a range of products such as mutual funds, insurance, bonds, fixed deposits, commodities and stocks, their activities come under multiple regulators including SEBI, RBI, IRDA and PFRDA.
SEBI is in discussions with other financial regulators to sort out inter-regulatory issues.
Self Regulatory Organisation..!
The Stock market regulator wants a Self Regulatory Organisation (SRO) to be set up.
The Self Regulatory body will oversee investment advisers besides making a clear distinction between advisers and distributors of financial products.
Recently few wealth managers have cheated HNIs (High Net Worth Investors )by selling complex financial products is what has prompted SEBI to work out a new set of rules.
There are lakhs of financial advisers operating in India several of them unqualified.
The SEBI's concern stems from the fact that these advisers recommend and push investment schemes that may not be in the best interest of an investor.
Now, SEBI intends to mandate all investment advisers to be certified and become a member of the SRO, which is likely to be set up in this financial year.
Chennai based an analysist said, ''Investment advisers would have to provide research-based advice to investors. They can't simply advise an investor without exercising due diligence. Risk-profiling of an investor needs to be done."
This is the second time that SEBI has worked out rules to regulate the activities of investment advisers who advise investors on a host of investment products for a fee. In 2007, it had come out with draft regulations for this segment but did not finalise it.
Now, SEBI is firming up rules after a couple of incidents involving wealth managers at well-known foreign banks came to light.
In 2010, December , a Rs. 300-crore fraud was reported in Citibank's Gurgaon branch as one of its relationship managers sold high-return schemes to HNI customers. The SEBI's concern is that since financial products are long-term in nature, investors are often left in the lurch when relationship managers switch jobs. SEBI plans to mandate individual and institutional agents to maintain records of their communication with investors as it will establish an audit trail.
SEBI thinks maintaining records will help as one can hold institutions responsible even if its relationship managers move on," said the person. Since investment advisers advice on a range of products such as mutual funds, insurance, bonds, fixed deposits, commodities and stocks, their activities come under multiple regulators including SEBI, RBI, IRDA and PFRDA.
SEBI is in discussions with other financial regulators to sort out inter-regulatory issues.
Self Regulatory Organisation..!
The Stock market regulator wants a Self Regulatory Organisation (SRO) to be set up.
The Self Regulatory body will oversee investment advisers besides making a clear distinction between advisers and distributors of financial products.
Recently few wealth managers have cheated HNIs (High Net Worth Investors )by selling complex financial products is what has prompted SEBI to work out a new set of rules.
There are lakhs of financial advisers operating in India several of them unqualified.
The SEBI's concern stems from the fact that these advisers recommend and push investment schemes that may not be in the best interest of an investor.
Now, SEBI intends to mandate all investment advisers to be certified and become a member of the SRO, which is likely to be set up in this financial year.
Chennai based an analysist said, ''Investment advisers would have to provide research-based advice to investors. They can't simply advise an investor without exercising due diligence. Risk-profiling of an investor needs to be done."
This is the second time that SEBI has worked out rules to regulate the activities of investment advisers who advise investors on a host of investment products for a fee. In 2007, it had come out with draft regulations for this segment but did not finalise it.
Now, SEBI is firming up rules after a couple of incidents involving wealth managers at well-known foreign banks came to light.
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