Intermediary
: Atul Gandhi
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Sr.
No.
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Pertains
to Point No
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Suggestions
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Rationale
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1
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4.1.1
4.1.2
4.1.4
4.8.4
4.8.5
4.12
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A)
IA doing financial planning should do risk profiling & KYC.
B)
IA doing mutual fund business can choose whether to take
commission as distributor or fees as advisor.
C)
IA doing only mutual fund advisory / distribution business should
not do risk profiling & KYC.
D)
IA doing only stock market advisory business should not do risk
profiling & KYC.
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1)
Too many complex regulation / compliance / restriction will lead
to demoralising / less appetite for (individual) people to do
(security / investment advisory) business in in India
2)
Last 20+ years SEBI may be unintentionally instrumental to
institutionalize securities business in India.
3)
BSE website shows around 3.23 crore investor base. Investor base /
penetration can be compared with mobile penetration / bank account
penetration in India for better comparison. Simple regulation will
help to build large Indian investor base investing in Stock
market.
4)
SEBI may encourage individual entrepreneurs to do business.
5)
IA Regulations broadly ask for risk profiling & doing KYC
Rational
for A) Financial planning advice include how wealth should be
divided amongst various investment classes such as stocks, debt,
bonds, real estate, gold, commodities, mutual fund, equity /
derivative trading and cash etc, so it is logical for financial
planner to do risk profiling
Rational
for B) Money is money whether it is taken as commission or fees.
There is no difference.
Rational
for C) i) Say a person wants to invest Rs 2000 or 5000 in mutual
fund, there is no logic / need of doing comprehensive risk
profiling. It require plain & simple advice
ii)
as investment in mutual fund requires KYC, adding procedural
requirement of KYC while advising IA / RA will take extra time /
efforts / documentation
Rational
for D) i) If person wishes to money in stock market, there is no
logic / need of doing comprehensive risk profiling. Usually
investors are not ready or willing to fill form / offer / share
all their financial data / fill risk profiling information.
They
just need one service – stock market advice, so it can be
offered.
ii)
As investment in stock market (opening trading account) requires
doing KYC, adding procedural requirement of KYC while advising
will take extra time / efforts / documentation.
iii)
People can open demat & trading account without risk profiling
then why is SEBI insisting on risk profiling on IA/ RA.
iv)
People are otherwise free to invest in stock market themselves
without risk profiling.
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2
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4.2.2
a
4.2.2
b
4.8.4
4.8.5
4.12
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It
is preferred to have separate regulation for
a)
IA doing financial planning
b)
IA doing mutual fund advisory
c)
IA doing stock market advisory
d)
All people advising investment in stock market with or without
consideration, incidental or un-incidental to their primary
business should follow same restriction on trading or disclosure
norm
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i)
Remove complexity in regulation
Rational
for d )
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3
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4.1.4.
c
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Avoid
use of confusing / complex words in draft / writing in regulation
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Describing
the product in “positive way” or recommending any particular
product, customer will take both positively as recommendation
only.
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4
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4.8
4.8.5
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Remove
complexity of trading via RA regulation. (which is contradictory
with IA regulation)
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i)
Research analyst gets salary from company he / she is working.
Stock Market Investment advisor does not get any salary
ii)
Recommendations by research analyst may reach to wider audience.
Investment advisor typically advice to his / her clients only.
iii)
IA regulations allows to trade in stock IA recommends. IA if
likely trade in stock IA recommends is it likely to be small
quantum / fraction of free market cap of company. So allow IA to
trade in stock he / she recommend. Allow IA to trade in stock as
per IA regulation. Remove Ra restrictions
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5
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4.2.1
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Regulation
/ business environment should be same / treat equally to all
intermediately
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If
recommending a stock or talking positive about stock is
“incidental” advice for stock broker service then IA should
also allow distribution or brokering service as “incidental”
to IA service
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6
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4.2.1
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If
RA regulation is applicable to IA, it should also be applicable
for portfolio managers & AMC too
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Portfolio
manager can invest in a stock and then come on public media like
CNBC tv & talk positive about stock they invested. But IA is
put under RA regulation restriction. Law should be equal to all
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7
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4.2.2
a
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RA
regulation if mandatory for IA then it should be mandatory for
other intermediately doing business in stock market like broker or
portfolio manager appearing in public media discussing stock with
or without consideration
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IA
regulation is simple. But restriction on trading is put on IA via
RA regulation, so RA regulation along with IA should be
applicable.
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8
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4.3.2
4.3.4
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With
opening of possibilities with technology in last 2 to 3 decade,
any intermediately whether individual or corporate, should allow
doing multiple businesses if desired.
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Those
who got lot of money power, can create different vertical i.e.
subsidiary and offer all kind of financial service (one stop
financial shop)
Whether
department / division or subsidiary, ownership remains same
Ultimately
management, beneficiary & profit of business goes to owners of
business, & SEBI has chosen to overlook this factor
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9
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4.4
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Same
rules should be applicable to competitions/games or public media
or CNBC
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i)
In schemes/competitions/games people talk positively / recommend a
stock
ii)
Whether talking positive for a stock in schemes/competitions/games
or CNBC is same, as it appeals to mass public
iii)
Regulation should be equal for all.
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10
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4.4.1
4.4.4
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People
taking positive about a stock in public media should follow IA &
RA regulation.
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Say
a portfolio manager invests in a stock and then talk positive in
CNBC. Portfolio manager did not get any consideration for talking
positive, but it is likely that that stock may go up &
Portfolio manager get indirectly benefited. And after few weeks
/months, Portfolio manager can exit stock & at the time of
existing stock he may not inform on CNBC.
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11
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4.4.5
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If
enrolling/getting
the clients registered/subscribed “for
consideration”,
then only IA/RA regulation should apply
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If
people wish to advice without
consideration,
then restriction on trading can apply as per IA or RA regulation
but do not make compulsion for doing risk profiling & KYC.
Unlike 1980’s era, with internet we are in open era & we
should respect freedom of expression. Thousands / lakhs of people
now a day’s subscribe to facebook / twitter page
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12
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4.5.2
4.7.2
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If
advice is for consideration then IA / RA regulation should be
applicable.
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i)
Evolve of communication media: Earlier day’s people used to talk
to other person. Then come postcard, telegram telephone,
afterwords email, mobile, sms, WhatsApp, ChatOn, WeChat, Twitter,
Facebook
ii)
Unlike US, In India people will always have 100’s of / lots of
friends & relatives
iii)
Friends & relatives may look for some suggestion say in event
of say BRIC exit should hold or sell stock ? or ask opinion on
whether to invest in RBL IPO or not ?
iv)
Freedom of expression should be respected
v)
If advice is against consideration, IA & RA should be
applicable
vi)
Legendary wealth creator people like Rakesh Junjunwala should be
allowed to speak openly in public media ( be reasonable while
putting restriction)
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13
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4.6.1
4.6.2
4.6.3
4.13.2
h
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i)Schemes/competitions/
games should be encouraged
ii)
Schemes/ competitions/ games should register with IA / RA
regulation
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i)
Talented people can express their skills through this platform, so
these platforms should be encouraged.
ii)
We have lots of singers come in limelight after they got change /
win competition in TV program started in 1990+ like Sa Re Ga Ma
Before 1990 very few singer were controlling industry.
iii)
Indian people (investment advisor ) are not so rich that they can
afford advt in prominent newspaper or TV channel.
Schemes/competitions/ games is best thing happened in India
iv)
It will also in line with “make in India” initiative of
government. We should see some big Indian people name /
institutions coming out in securities market, in next 10 to 15
years with help of Schemes/competitions/ games
v)
competitions/ games promotes entrepreneurship spirit, so it should
be respected
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14
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4.6.2
v
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Everyone
knows stock market is risky investment. No registered
intermediately will ever take responsibility of loss in stock
market. Not everyone makes profit in all stock market transaction
even if it t is registered intermediary
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Investment
is always subject to market risk.
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15
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4.9
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Separate
risk profiling format / questionnaires should be created for
corporate clients / non individual clients
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i)
Money is money whether it is with individual or non individual.
Risk associated / return on investment will be same whether money
is invested by individual or non individual
ii)
Regulation should be fair for all, preferably should not give some
extra benefits to some class of intermediary
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16
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4.11
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Payment
can be made in cash. Receipt should be provided for cash payment.
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i)
In day to day life, in India various payments are still done in
cash as against card used in USA
ii)
Cash is still convenient for payment as against cheque.
iii)
Not everyone is comfortable using NEFT.
iv)
Bank still accept cash deposit in account to whom payment is to be
made.
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17
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4.13.2
iii
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Not
understand what is the meaning of clause.
Sharing
all past performance data with prospective client or on website
should be compulsory
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New
customer usually ask for past performance details as well as
reference of existing clients contact number. Lakhs of people play
cricket plays cricket in India, but performance of Sachin makes
difference. Sharing past performance will enhance transparency &
build trust
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18
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4.14
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If
IA has website, details should be mentioned.
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In
India business is still carried offline i.e. brick & mortar
structure as well as online. IA in brick & mortar structure
should not be under compulsion to have website
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19
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4.14.2
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Basic
information on website should be provided. Below information
should not be provided
1.
know
your client forms,
2.
client agreements
3.
correspondences with the clients
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i)
Backend database structure is required for creating website with
too many features as mentioned in SEBI consultation paper. Website
with database structure is costly & also needs technical help
from designer. Maintenance cost will also be high
ii)
keep regulation simple
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20
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4.16.5
v
4.16.5
vii
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Below
clause should be removed “comprehensive
system audit requirements are put in place”
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i)
IAs are small people providing advisory. IA is not a big
institution doing big business.
ii)
Keep regulation simple
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21
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4.17
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Recognition
should be given rethink or NiSM should offer lifetime validity for
its certificate
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i)
Various other certificate or degree offered such as CFP or CFA has
lifetime validity, but NiSM certificate has only 3 years validity.
ii)
Foreign degrees like CFP or CFA should be treated at par with
local or Indian certificate or degree offered by NiSM
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