Regulatory body SEBI suggests allowing financial advisors to display their previous performance records
The Securities and Exchange Board of India (SEBI) has proposed a significant change that aims to improve the investment advisory industry in India. This move is part of SEBI's ongoing efforts to enhance transparency and protect investors.
Under the proposed changes, investment advisors and research analysts would be allowed to advertise their past performance. This disclosure would be mandatory and standardized, providing clients with clear details on investment approaches and benchmarking against appropriate performance indicators.
SEBI's Investor Charter for Registered Investment Advisers (RIAs) also mandates disclosures around credentials, fees, and complaint redressal mechanisms. It includes caution notes urging investors to verify registration and avoid non-transparent engagements, reinforcing the need for clear disclosure of advisers' past records and credibility.
Regulatory oversight and uniformity are also key aspects of these updates. While SEBI has not specified a separate format exclusively for research analysts’ past performance disclosure, the broader regulatory emphasis on uniform disclosure practices across intermediaries suggests increased scrutiny and standardization in disclosure norms.
Clients would also benefit from the proposed change, as they would be allowed to seek a second opinion from a different investment advisor on assets and financial advice. This could potentially lead to increased competition among investment advisors in India, providing clients with more options and potentially better advice in investment decisions.
The proposed change, if implemented, would potentially improve the transparency of investment advice and research in India. It is a response to feedback received by SEBI regarding the need for more client options in investment advisory services. The change would allow investment advisors and research analysts to disclose their past performance details to clients, enabling them to compare advice from multiple advisors before making investment decisions.
In summary, SEBI's proposed changes aim to enhance the ability of investment advisors and research analysts to serve clients by providing more transparency, competition, and client options in India's investment advisory industry. The updates are expected to bring about a more informed and empowered investment decision-making process for clients.
Investment advisors and research analysts, under SEBI's proposed changes, are now allowed to disclose their past performance, offering clients clear details about investment approaches and facilitating comparisons with appropriate performance indicators. This move towards transparency is part of SEBI's ongoing efforts to enhance business practices in the investment advisory industry, aiming to protect investors and foster a more informed and empowered decision-making process. Additionally, clients would gain the advantage of seeking a second opinion from different investment advisors, which could potentially instigate increased competition and better quality investing in the Indian market.
