SEBI’s Informal Guidance: Investment Advisors Can't Manage Funds, Securities on Clients' Behalf
Moneylife Digital Team 03 July 2021
Investment advisors cannot manage funds as well as securities on behalf of their clients and should not contemplate about asking power of attorney in this regard, the Securities and Exchange Board of India (SEBI) has clarified. Investment advisors can only provide investment advice to clients, SEBI added.
 
The clarification which comes as part of a response to an informal guidance sought by Waterfield Financial and Investment Advisors regarding SEBI’s investment advisors (IA) rules. 
 
In its letter, the Waterfield Financial and Investment Advisors asked the market regulator whether its clients can, out of their own will, grant a power of attorney (PoA) to Waterfield authorising it to make enquiries with respect to the clients' accounts with the custodian.
 
The investment advisor also sought guidance whether Waterfield can liaise with the clients' custodian and receive information in relation to clients investment decisions, investment products under the PoA at all times after receiving written consent and instruction from clients.
 
The letter requested SEBI to clarify whether such services would be considered "implementation services" under the IA rules.
 
In its response, SEBI said an IA is required to render investment advise to its clients and not manage funds or securities on behalf of the clients under the IA Regulations.
 
Considering the scope of activities allowed to an investment advisor under the IA Regulations, "grant of a PoA has neither been envisaged nor appears desirable for an IA", SEBI mentioned.
 
However, SEBI noted that this position is based on the information furnished, and said "different facts or conditions might lead to a different interpretation".
 
Under the current rules, registered investment advisors (IAs) can offer execution services for their advisory clients but only without charging any commission or fees
 
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