Reply To SEBI On Consultation Paper Self Regulatory Organizations in Securities Market

Reply to SEBI on 21-Apr-2019

Name of the Entity/ Person: Atul Gandhi CommunicateAtul@Gmail.com 9371331337
Sl. No.	Reference Para of the Consultation Paper or other provisions of the SRO Regulations	Suggestions	Rationale
	1.1.1 5.5.1 5.5.4	Option A) Most preferred option Single SRO for all people / entities doing business in securities market Research analyst Investment Advisor AMC Mutual fund PMS IA / RA Broker Television Print media competitions/games Open / electronic media like facebook / twitter / youtube etc Legendary wealth creator people like Rakesh Junjunwala speaking in public Option B) Second preferred option Have separate SRO for a) IA doing financial planning b) IA doing mutual fund advisory c) IA doing stock market advisory	Rational of Option A 1) Level playing field: Regulation / business environment / law / legal environment should be same / treat all people / entities /intermediaries doing business in securities market 2) Some months ago Research analyst regulation restriction made mandatory for Investment Advisor. If Research analyst regulation restriction made mandatory for Investment Advisor , then logically it should have been made applicable to other intermediately doing business in stock market like broker or portfolio manager appearing in public media discussing stock with or without consideration 3) Portfolio manager can invest in a stock / sector and then come on public media like CNBC tv & talk positive about stock / sector they invested. But IA is put under RA regulation restriction. Law should be equal to all 4) 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. 5) It is possible : One arm of institution buys a stock and afterword other arm of same institution recommend same stock to public : One arm of institution recommends a stock to public and other arm of same institution sells stock /books profit. 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 6) Financially rich institutions should not be given preferences / advantages / treated differently / different law over investment ad visors. 7) Broker, who is interested in broking income, can give research report / investment advice. SEBI says its incidental to their business. But restrictions on IA / RA has been put by SEBI 8) Investor can get input from print-tv-online media without risk profiling and KYC. Restrictions on IA and RA are put by SEBI 9) IA regulation put compulsion for doing risk profiling. Regulation clearly mentions that “income details” and “existing investments/ assets” should be taken from client But Investor can open demat & trading account without doing risk profiling Investor can buy or sell stock as per his wish without doing risk profiling Investor can take input new paper or CNBC or other media & buy or sell stock without doing risk profiling 10) Law should be same for all intermediaries as well as print-tv-online media in securities business. Rational of Option B 1) Consultation paper says there are are approx. 1,24,000+ distributors of MF products Vs only 1,136 IAs registered with SEBI as on March IA are less than 1% of total. IA business model is very different from distributor, so we need different SRO. 2) Put in simple words Differnt SRO for 1) intermediaries doing financial planning 2) intermediaries doing mutual fund business 3) intermediaries doing only stock market advisory 3) In past I am registered myself as Investment advisor, offering investment advisory service in stock market. I advice for direct buying / selling in stock market MF is distributor does not advice direct investment in stock market. At AMC there is fund manager who decides buying / selling in stock market Business structure / nature are different. So need is there for separate SRO

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	Suggestions	Rationale
1	4.1.1 4.1.2 4.1.4 4.8.4 4.8.5 4.12	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.
2	4.2.2 a 4.2.2 b 4.8.4 4.8.5 4.12	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 )
3	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.
4	4.8 4.8.5	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
5	4.2.1	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
6	4.2.1	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
7	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.
8	4.3.2 4.3.4	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
9	4.4	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.
10	4.4.1 4.4.4	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.
11	4.4.5	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
12	4.5.2 4.7.2	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)
13	4.6.1 4.6.2 4.6.3 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
14	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.
15	4.9	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
16	4.11	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.
17	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
18	4.14	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
19	4.14.2	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
20	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
21	4.17	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

Criticism with respect : Note on regard to recent blogs

Note on deactivation

I grow up with Indian mythology of sharing. Whatever we have, share with people. Being in stock market since 1994, I started sharing knowledge via stock market advisory service from 2011. Various commendable recommendations as well as predicted market direction well ahead of time during the period via blog as well as advisory.

Due to unfavorable regulatory environment, I am choosing to deactivate this advisory service. Link of blog written in this regard.

https://atulgandhicom.blogspot.in/2017/12/shree-ganeshaya-namah-advisory-service.html

Advisory service is deactivated from 01-Jan-2018

Let’s see what call SEBI takes on its consultation paper issued in 2016.

I am thankful to you for availing my advisory service / visiting my website / following on facebook / twitter

Best wishes to you to create wealth and good fortune  

|| Shree Ganeshaya Namah || Advisory Service Deactivated

At the new beginning, we usually have a ceremony.

Ceremony usually begins mentioning its grace of god i.e. || Shree Ganeshaya Namah ||

Can an end also be marked with grace and blessings of god :)?

With grace of god I am deactivating stock market advisory service business from 01-Jan-2018 :D

Looking back…

I made a humble beginning in year 2011-12.

In first year of business operation, I did not get any customer. Guess, having worked in finance domain in past, I don’t had marketing experience.

In later years I work on marketing and got clients from India as well as abroad.

Lots of overwhelming & dramatic result happened post launch of mobile app, which got 1500+ download in just three months of launch.

In 2011-12 securities market business environment was open / liberal in India. In later years it got complicated with new contradictory regulations in 2013, 2014 & 2016, which are taking securities market business to license raj era officially.

It’s strange but true that I am taking this decision in “Modi Sarkar Raj” which won election on promise of ease of doing business and Make In India. But in reality Modi says “Only rich institutions should do business in India” there by denying wealth creation opportunities to 130,00,00,000 Indians

Intention of blog is not to blame someone, but together we can understand each others view point. May each person of India take benefits of development and growth of country.

Below are blogs written in this regards

Is Investor is a loser with SEBI’s “Research Analysts”regulation 2014

https://atulgandhicom.blogspot.in/2015/01/is-investor-is-loser-with-sebis.html

Narendra Modi Creator & Destroyer Of Indian Business

https://atulgandhicom.blogspot.in/2017/05/narendra-modi-creator-destroyer-of-Indian-business.html

Is SEBI Holding Back India And Indian Investor?

https://atulgandhicom.blogspot.in/2017/11/is-sebi-holding-back-india-and-indian.html

Whats next

My registration is valid till 2019

I will wait for SEBI takes call on it own consultation paper issued in 2016. If on or before 2019, SEBI’s call on consultation paper is “ease of doing business”,

a) I may activate / start offering paid advisory service

b) Else post SEBI’s call on consultation paper, I don’t mind even offering free advisory service to people via existing set up like blog / facebook / twitter / mobile app in open media and in return / asking people to make charity or help other people

c) I may choose to close down advisory from proposed deactivation status

It’s preferred to have predictable legal environment.

Thanks you and as always enjoy, keep smiling & blessings

Happy Investing

AtulGandhi.com

Modi Win & Government Failed, Deprived Indians

This blog is not a political statement.

Wish people / society moves from scarcity to abundance

In 2014 people voted Modi with

: Lots of optimism

: Anticipated breakthrough development

: Expectation of big bang changes / reform in India

: Glorious future for India

In Reality

: Modi win and government failed

: Modi missed big bang reforms

: Modi failed short of people’s expectation

: Modi didn’t do anything wrong, but he didn’t do the right things

The term big bang reform / major changes was very much popular at the time of 2014 election. Let’s quantify in words what is mean by “big bang changes” / people expectations. Neither people define nor Modi define it, let’s put in simple word as “Affordable Life”

What is “Affordable Life”

If a persons work sincerely in a day, then he should have reasonably priced home, quality education for children, convenient transportation, fair & transparent law and order,  quality food, reasonably priced medical facility , savings for future etc

Lets see how Modi failed short of people’s expectation

1) Smart City vs Rebranding / Renaming Exiting City As Smart City

Initial plan was to build “NEW” 100 smart city and not as seen today i.e. rebranding / renaming existing city as smart city

Past : One state one city strategy

In last few years, I lived at Pune, Mumbai, Bangalore & Hyderabad.

Apart from financial capital Mumbai, lots of development happened in Pune in past few decades in Maharashtra. In Karnataka you may not have heard any well-known city name apart from Bangalore. Even though today we have two states, Telangana & Andhra Pradesh as separate, still they have joint capital Hyderabad. Simply because prior to division of state, only one city was developed i.e. Hyderabad

Result of this kind of strategy

Outcome of this kind of strategy is people all across small city or village migrate /wish to live in metro city for education / job / business. Off course this can be politically motivated, people making policy say starting an education institute / software hub / offering tax concession at industrial area, can buy land in designated zone well in advance to have unfair benefits

How big can be unfair benefit?

Lets make hypothetical unrealistic projection

Pune’s population increased from 15+ lakh in 1991 to present around 60 lakhs

Approx 45 lakhs addition of people

Say 11.25 lakh units of residential house / flats (assuming hum do hamare do, nuclear family structure)

Let’s make more assumptions. Had development had not happened property rates would have been lower say construction cost 1700 per square foot + land cost 1000 per square foot.

Present average property purchase rate say 6500 per square foot.

Average house / flats size say 700 square foot

Unfair benefit per unit 700*(6500-2700) = 26.60 lakhs

For 11.25 lakhs units amount will be 26.60 lakhs *11.25 lakh = 299250,00,00,000 i.e. approx 3 lakh crore per city.

There numbers are hypothetical unrealistic and can be debatable. 

Whatever may be real number, question is why people should spend large part of their active working life, to have “Makan”

Rather than investing in “Makan”, can investment be routed to productive assets for well being people as well as country?

How new smart city could have been benefited

Residential: lower real estate cost i.e. better life

People spend less time of active working life in job / business, i.e. spend more time with children, spouse, parents, and also spent time on personal interest / development / entertainment 

Commercial: lower cost i.e. eases of doing business

Not every person is interested working in industrial / software park. Lots of people want to do business on their own. Today in big city rental cost of shop /office for business are too high.. I have seen people paying 20,000 to 50,000 per month i.e. paying 2 lakhs to 6 lakhs as yearly rental in good locality. High rental is big barrier for doing business. Though people have interest to do business, they can’t afford rental cost.

People can buy properly to do business rather paying rental

Say 300 sq feet shop area can be available at low prices, say a rate of 4000 per square i.e.  12 lakh per business shop. People can afford to buy shop and do business rather paying for rental.

Lower cost of products and services

In mall or QSR prices are inclusive of rental cost. If rental cost can be brought down, cost of products and services will be lower.

More prime market space to do business / large people engagement

Some part of city is well known for shopping. Space limitation is there for new businessman to enter in this market. If we can have say 5 to 7 new smart city per state can lead to more prime market space available to do business.

Inclusive growth

More people can be financially engaged

New investment cycle & growth

Development of new city can lead to investment cycle

2) Complex Laws vs Simple Fair and Transparent Laws

Recently Modi made statement that government has scrapped more than 1,200 redundant laws. How many of us aware of name / contents of these 1200 laws?

Reality is laws which are used in day to day business are highly complex / bureaucratic. They should be simplified and made fair and transparent.

Other recent news says The Directorate General of Foreign Trade (DGFT) has issued notices to about 100 Indian units of multinationals, demanding refund of around ?5,000 crore that it said they wrongly claimed since 2003 under an export promotion scheme for services

These companies are not sham company or doing business with black money. It just those laws are complex and interpreted differently by company as compare with DGFT.

In year 2017 government is going back to accounts of 2003

Every few months I saw some business news arising out of complex laws

During negotiation at the time of Jewellers strike in 2016, news appeared that jwellers are ready to pay tax but they do not want central excise officers to visit their premises.

How much comfort does corporate or people have while interacting with government agencies?

Demonetization

Let’s talk about demonetization as it has got a very clear message from people

In 2008 world faced financial crisis, but Indian economy was resilient. It is said that India has parallel black economy so world crisis had not affected India in great way.

On 08nov2016, Modi launch surgical strike on black money and corruption via demonetization.

Black money

Black money term is used for people as well as government..

a) People stand with patience in queue for long hours to get notes deposited / exchanged.

Why

Poople have respect for Modi, so they did not complain about it

b) 15lakh crore + money / old notes were in circulation at that time. Almost all money / old notes found to be deposited in bank / exchange with new notes. Why almost all black money find way to bank?

People hate bureaucracy / complex income tax law / office. People converted almost all black money. As laws are complex, people find smart / intelligent ways to convert money.

Simple message people respect Modi but hate government / bureaucracy. Wish government respect people and simplify laws.

Earlier Modi launched “swachh bharat abhiyan” with broom in hand. Later he comes to know unless people participate in it, it can’t be successful. If people have more respect for local government body in their area, they will keep city clean. People respect foreign, so when Indian goes foreign they don’t litter there

If government respects people by making simple fair and transparent laws as well as interaction with government agencies, people will follow it.

Corruption

Corruption term is mostly used / associated with government or government agencies. Corruption is not required when in ordinary course of life people buy / sell goods / services

Government made telecom and coal auction online i.e. corruption free /transparent manner. Does all transaction at / interaction with government agencies is corruption free?

3) Make In India By Foreign Investment vs Make In India With Indian money

Modi went all around world for MakeInIndia with foreign investment. Not sure how much is delivered.

Modi ignored / underestimated power of money that Indian people have / can invest. Modi can get dramatic results, if he can crate investment opportunity for Indian people to invest in Indian projects

4) Less Work More Credit

GST was initiated by congress; BJP opposed it when it was in opposition.

Now Modi claims credit for it

May be at some point of time the black economy will be converted into white

i.e. unaccounted trade will be accounted trade

i.e. business will remain same (black + white) but accounted business (white) will increase.

Increase in white trade will increase in GDP

& Modi will claim credit for it.

To sum up

Modi has chosen technique which will take long period of time for success of India. It may take a decade or more for glorious golden future for India rather than five year election term.

Wish people / society moves from scarcity to abundance

Usually I don’t write blog on criticism. But, recently I have written few blogs with criticism. Hope I am back on constructive side to create something beautiful

Also read my 2014 blog :)

India Aspires For Glorious Golden Future :) Cheers !!

https://atulgandhicom.blogspot.in/2014/05/india-aspires-for-glorious-golden.html