- Wealth PMS
SEBI is looking to tighten regulation for investment advisers who offer “hot tips” on the Internet, SMS and other media. For this, it is asking for help from the SEC, the SEBI equivalent of the US.
SEC has set up legislation for advisers, who are required to provide a Form ADV to the regulator (which is searchable) and required detailed disclosure of fees charged, other income received, any pending legislation etc. All advisers “who manage assets more than $25 million” must be registered federally, and others need state level registration.
From SEBI it seems:
Amid the sharp rally in the Indian stocks over the past few years, the public interest has grown manifold in the market and so has been the number of advisers — who keep inundating investors with “hot tips” on which stocks to buy or sell through TV channels, newsletters, magazines, newspapers, websites and some innovative media like SMS and phone calls.
Damodaran has expressed his discomfort on many occasions over the the growing number of self-appointed advisers, while there also have been certain cases when the regulator has fined individuals and entities for dishing out tips on market activities without proper disclosures.
The matter has become a nuisance after cases like the Anirudh Sethi episode, where SEBI issued an order banning him from giving market tips. His “hot tips” in exchange for money, says SEBI, involves a contract that effectively manages portfolios, and therefore is governed by SEBIs portfolio manager rules. Of course, that would incite protests, as the registration procedure for a portfolio manager is a fee of Rs. 10 lakhs upfront, Rs. 1 lakh a year and requirements on minimum net worth etc., which is obviously going to restrict investment advise only to the ultra-rich. Not desirable.
So SEBI has to regulate the advisory space, yet keep it regulated so people don’t try to offer ridiculously high guarantees or have no penalties for misinformation. And in the process, not stifle the freedom of press – which means they can’t stop anyone writing in the media. How they do this will be interesting.
Note: SEBI has asked for comments from the public on how to handle this.