India, Keep Rising !!

24 April 2019

Reply To Consultation Paper on Amendments/Clarifications to the SEBI (Investment Advisers) Regulations, 2013

As from time to time complex regulation brought by SEBI, my reply to SEBI has been apparently complex

Its preferred new fresh simple regulation can be re-drafted to have fair and transparent regulatory environment. 

Communication to SEBI on 21-Apr-2019

On consultation paper 2016 & securities market environment
I guess after coming out with multiple regulation / creating complex regulatory environment, SEBI is finding difficult to take call on SEBI’s own consultation paper issued in way back 2016. If you want I can offer simplified, fair and transparent regulation / legal structure for securities business in India 

Below is reply to SEBI in Oct-2016

This letter is dedicated to PM Narendra Modi’s vision for India
  • सबका साथ सबका विकास
  • मेक इन इंडिया
  • व्यापार करने में आसानी

Intermediary : Atul Gandhi
Sr. No.
Pertains to Point No
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.

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.

4.2.2 a
4.2.2 b
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
i) Remove complexity in regulation
Rational for d )

4.1.4. c
Avoid use of confusing / complex words in draft / writing in regulation
Describing the product in “positive way” or recommending any particular product, customer will take both positively as recommendation only.

Remove complexity of trading via RA regulation. (which is contradictory with IA regulation)
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

Regulation / business environment should be same / treat equally to all intermediately
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

If RA regulation is applicable to IA, it should also be applicable for portfolio managers & AMC too
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

4.2.2 a
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
IA regulation is simple. But restriction on trading is put on IA via RA regulation, so RA regulation along with IA should be applicable.

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.
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

Same rules should be applicable to competitions/games or public media or CNBC
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.

People taking positive about a stock in public media should follow IA & RA regulation.
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.

If enrolling/getting the clients registered/subscribed “for consideration”, then only IA/RA regulation should apply
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


If advice is for consideration then IA / RA regulation should be applicable.
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)

4.13.2 h
i)Schemes/competitions/ games should be encouraged
ii) Schemes/ competitions/ games should register with IA / RA regulation
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

4.6.2 v
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
Investment is always subject to market risk.

Separate risk profiling format / questionnaires should be created for corporate clients / non individual clients
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

Payment can be made in cash. Receipt should be provided for cash payment.
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.

4.13.2 iii
Not understand what is the meaning of clause.
Sharing all past performance data with prospective client or on website should be compulsory
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

If IA has website, details should be mentioned.
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

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
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

4.16.5 v
4.16.5 vii
Below clause should be removed “comprehensive system audit requirements are put in place”
i) IAs are small people providing advisory. IA is not a big institution doing big business.
ii) Keep regulation simple

Recognition should be given rethink or NiSM should offer lifetime validity for its certificate
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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