Sebi puts in place operating guidelines for investment advisers in IFSC

Markets regulator Sebi on Thursday came out with guidelines for entities for operating as investment advisers in International Financial Services Centre (IFSC), under which such advisers need to have a net worth of at least USD 1.5 million. The decision has been taken following the representations received from various stakeholders, the Securities and Exchange Board of India (Sebi) said in a circular. Under the framework, any recognised entity or entities desirous of operating in IFSC as an investment adviser (IA), may form a company or LLP to provide investment advisory services.

The country’s only IFSC is in GIFT City near Ahmedabad in Gujarat. An applicant needs to have a net worth of not less than USD 1.5 million (about Rs 10.5 crore). In case the IA is set up as a subsidiary, the net worth requirement is to be met by the subsidiary itself. However, if the subsidiary does not meet the criteria, the net worth of the parent can be considered.

The investment adviser needs to fulfil the net worth requirement separately and independently for each activity undertaken by it under the relevant regulations. Spelling out qualification and experience requirement for IA, Sebi said partners and representatives of applicants offering investment advice will need to have a post graduate degree or post graduate diploma of a minimum two years tenure in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from recognized institution.

Those having experience of at least five years in activities relating to advice in financial products or securities, or portfolio management, or investment advisory services are also eligible. Sebi said that an IA will have to ensure to conduct annual audit in respect of compliance with investment adviser norms and these guidelines from a chartered accountant or a company secretary or its equivalent under the laws in force of the country in which the applicant is registered. In case of overseas applicants, a net worth certificate (not more than six months old at the time of filing of application) by a chartered accountant or its equivalent will have to be provided.

The membership number or any other identification number of the chartered accountant needs to be included in the certificate. In case of overseas applicants, a credit score from a body similar to CIBIL, if existing in the applicant’s jurisdiction, will have to be provided. The markets regulator has prescribed an application fees of USD 750 for registration as investment advisers for operating in IFSC and a renewal fee of USD 7,500.