Ban on circulation of trading tips via social media
The SEBI has issued consultation paper( C larifications to the SEBI (Investment Advisers) Regulations, 2013 ) proposing amendments or clarifications to the investment adviser regulations. The objective of the consultation paper is to specify uniform standards across all the intermediaries/persons engaged in providing investment advisory services irrespective of whether such activity is incidental to their primary activity or not and to address the gaps or overlaps in legal or regulatory standards.
The key highlights of consultative papers are as under:
- Ban on circulation of trading tips via social media platform: SEBI has proposed to curb the practice of providing trading tips (containing buy or sell recommendation on securities) to the general public through any social media platform such as SMSs, email, telephonic call, whatsapp, ChatOn, Wechat, Twitter, Facebook, etc.
- Restrictions on mutual fund distributors:Under the existing norms, a mutual fund distributor can sell mutual fund products and he can also provide basic advice on mutual fund products and in executing the transactions. It has been proposed that only corporate entities registered as investment advisers should offer execution or distribution services. Further, mutual fund distributors should be registered as investment advisors if they want to engage themselves in providing incidental or basic investment advisory services on mutual fund products.
- No exemption for professionals: Under the existing norms Chartered Accountants, Company Secretaries, Portfolio investors, stock brokers, etc., are exempted from registration to act as investment advisors. But now SEBI has proposed that all the persons engaged in financial planning services shall mandatorily be required to register themselves as investment advisors.
- Banon schemes, games, and competitions: It is observed that various entities are offering schemes, competitions, games, leagues, etc., related to securities market. Such Schemes are generally based on predicting the price movement of securities and they are neither approved nor endorsed by SEBI. In order to protect the interest of the investors in the securities market and to curb such practice of offering schemes, etc., it is proposed to add new provision to restrict such activities.
- Compliance Audit:An investment adviser shall conduct yearly audit in respect of compliance with regulations from a CA or CS. Now it has been proposed that the compliance audit shall be completed within 3 months after the end of financial year and adverse observances or comments shall be brought to the notice of market regulator SEBI.
- Mode of acceptance of fee: Under the existing norms an investment advisor can accept fees in any mode including cash. Now SEBI has proposed that an investment adviser shall accept fees strictly by account by payee crossed cheque/demand draft or by NEFT/ RTGS/IMPS or any other mode allowed by RBI.
- Uniform advertisement code:Under the existing framework, there are no guidelines prescribed forissuing advertisement on mutual funds. Now SEBI has proposed uniform guidelines for issuing advertisement on mutual funds.
- Details of website:Many investment advisers are providing investment advisory services through websites without disclosing their details in a proper manner and thereby creating confusion to the investors with regard to authenticity of their registration. To clear the ambiguity, it has been proposed that all investment advisers shall display following details more prominently –
– Their name as registered with SEBI,
– Registration number, validity of registration, own logo, if any, and
– Complete address with telephone numbers on its portal /website, if any,
– Notice/display boards, advertisements, publications, know your client forms, client agreements and correspondences with the clients