MASTER CIRCULAR
SEBI/HO/MIRSD-PoD-2/P/CIR/2023/89 June 15, 2023
To,
All Investment Advisers registered with Securities and Exchange Board of India
Dear Madam / Sir,
Subject: Master Circular for Investment Advisers
1. Securities and Exchange Board of India (SEBI), from time to time, has been
issuing various circulars/directions to Investment Advisers (IAs). In order to enable
users to have access to the applicable circulars at one place, this Master Circular
in respect of IAs is being issued.
2. The Master Circular is a compilation of all the existing/ applicable circulars issued
by SEBI pertaining to IAs.
3. The list of SEBI circulars compiled in this Master Circular is given in Appendix at
the end of this Master Circular. From the date of issuance of this Master Circular,
the circulars mentioned in Appendix shall stand rescinded to the extent applicable
to IAs.
4. Notwithstanding such rescission,
a) Anything done or any action taken or purported to have been done or taken
under the rescinded circulars, prior to such rescission, shall be deemed to
have been done or taken under the corresponding provisions of this Master
Circular;
b) Any application made to the Board under the rescinded circulars, prior to such
rescission, and pending before it shall be deemed to have been made under
the corresponding provisions of this Master Circular;
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c) The previous operation of the rescinded circulars or anything duly done or
suffered thereunder, any right, privilege, obligation or liability acquired,
accrued or incurred under the rescinded circulars, any penalty, incurred in
respect of any violation committed against the rescinded circulars, or any
investigation, legal proceeding or remedy in respect of any such right,
privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as
if the rescinded circulars have never been rescinded.
5. This circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market.
6. This circular is available on SEBI website at www.sebi.gov.in .
Yours faithfully
Srishti Ambokar
Deputy General Manager
Tel. No. 022-26449354
srishtijc@sebi.gov.in
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TABLE OF CONTENTS
Sr. Subject Page
No. No.
I. GUIDELINES FOR INVESTMENT ADVISERS
1. G uidelines For Investment Advisers 5
II. MEASURES TO STRENGTHEN THE CONDUCT OF INVESTMENT ADVISERS
2. M easures to strengthen the conduct of Investment Advisers 13
III. ADMINISTRATION AND SUPERVISION OF INVESTMENT ADVISERS
3. A dministration and Supervision of Investment Advisers 14
4. F ramework for administration and supervision of Investment Advisers under 16
the Securities and Exchange Board of India (Investment Advisers)
Regulations, 2013
IV. TECHNOLOGY RELATED
5. A dvisory for Financial Sector Organizations regarding Software as a Service 19
(SaaS) based solutions
V. INVESTOR COMPLAINTS
6. R edressal of investor grievances through SEBI Complaints Redress system 20
(SCORES) Platform
7. P ublishing Investor Charter and disclosure of Investor Complaints by 21
Investment Advisors on their websites/mobile applications
VI. MISCELLANEOUS
8. P rocedure for seeking prior approval for change in control 22
9. A dvertisement code and usage of brand name/trade name 25
10. F acilitating transaction in Mutual Fund schemes through the Stock 31
Exchange Infrastructure
11. U nauthenticated news circulated by Market Intermediaries registered with 31
SEBI through various modes of communication
12. G uidelines on Outsourcing of Activities by Intermediaries 32
13. F ramework for Regulatory Sandbox 33
14. G eneral Guidelines for dealing with Conflicts of Interest of intermediaries 34
and their Associated Persons in Securities Market
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Sr. Subject Page
No. No.
15. A pproach to securities market data access and terms of usage of data 36
provided by data sources in Indian securities market
16. R eporting Requirements under Foreign Account Tax Compliance Act 37
17. G uidelines on Anti-Money Laundering (AML) Standards and Combating the 38
Financing of Terrorism (CFT) /Obligations of Securities Market
Intermediaries under the Prevention of Money Laundering Act, 2002 and
Rules framed there under
VII. REPORTING REQUIREMENTS 39
VIII. ANNEXURES 41
18. A NNEXURE A - Terms and conditions of agreement between IA and the 41
client
19. A NNEXURE B - Investor Charter in respect of IAs 48
20. A NNEXURE C - Complaint Data to be displayed by IAs 52
21. A NNEXURE D - Advisory for Financial Sector Organizations Software as a 54
Service (SaaS) based solution
22. A NNEXURE E - Declaration cum undertaking for seeking prior approval for 56
change in control
23. A NNEXURE F - Principles for Outsourcing for intermediaries 58
IX. APPENDIX: List of Circulars/ Notifications/ Communications 64
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I. GUIDELINES FOR INVESTMENT ADVISERS
1. Guidelines for Investment Advisers1
1.1. SEBI, after considering the inputs from public consultation, reviewed the
framework for regulation of IAs and notified Securities and Exchange Board
of India (Investment Advisers) (Amendment) Regulations, 2020 on July 03,
2020. These amendments came into force on September 30, 2020.
1.2. In accordance with the Securities and Exchange Board of India (Investment
Advisers) Regulations, 2013 (‘the IA Regulations’), IAs shall ensure
compliance with the following guidelines:
(i) Client Level Segregation of Advisory and Distribution Activities
To ensure client level segregation at IA’s group/family2 level, as per
Regulation 22(5) of the IA Regulations, following compliance and
monitoring process shall be adopted:
(a) Existing clients, who wish to take advisory services, will not be
eligible for availing distribution services within the group/family of
IA. Similarly, existing clients who wish to take distribution services
will not be eligible for availing advisory services within the
group/family of IA.
(b) A new client will be eligible to avail either advisory or distribution
services within the group/family of IA. However, the option to avail
either advisory services or distribution services shall be made
available to such client at the time of on boarding.
1 Reference: Circular SEBI/HO/IMD/DF1/CIR/P/2020/182 dated September 23, 2020
2 “Group” and “family of an individual investment adviser” shall be as per Regulation 22(3)(iii) and
Regulation 2(gc) respectively of the IA Regulations
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(c) Client under these guidelines shall include individual client or non-
individual client.
(d) The client shall have discretion to continue holding assets prior to
the applicability of this segregation under the existing
advisory/distribution arrangement. However, the client shall not be
forced to liquidate/switch such existing holdings.
(e) Permanent Account Number (PAN) of each client shall be the
control record for identification and client level segregation.
(f) In case of an individual client, “family of client”3 shall be reckoned
as a single client and PAN of all members in “family of client” would
jointly and severally be the control record. However, the same is not
applicable for non-individual clients.
(g) The dependent family members shall be those members whose
assets on which investment advisory is sought/provided, originate
from income of a single entity i.e. earning individual client in the
family. The client shall provide an annual declaration or periodic
updation as the case maybe in respect of such dependent family
members.
(h) IA shall, wherever available, advise direct plans (non-commission
based) of products only.
(i) The IAs shall maintain on record an annual certificate from an
auditor (in case of individual IA) and its statutory auditor (in case of
a non-individual IA) confirming compliance with the client level
3 “Family of client” and “AUA” shall be as per Regulation 2(gb) and Regulation 2(aa) respectively of
the IA Regulations
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segregation requirements as specified in Regulation 22 of the IA
Regulations. Such annual certificate shall be obtained within 6
months of the end of the financial year and form part of compliance
audit, in terms of Regulation 19(3) of the IA Regulations.
(ii) Agreement between IA and the client
(a) Regulation 19(1)(d) of the IA Regulations provides that IA shall
enter into an investment advisory agreement with its clients. The
said agreement shall mandatorily cover the terms and conditions
provided in Annexure A.
(b) IA can include additional terms and conditions in the agreement
without diluting the provisions of the IA Regulations and
amendments thereto as well as circulars issued thereunder.
(c) IA shall ensure that neither any investment advice is rendered nor
any fee is charged until the client has signed the aforesaid
agreement and provided copy of signed agreement to the client.
(iii) Fees
Regulation 15A of the IA Regulations provides that IAs shall be entitled
to charge fees from a client in the manner as specified by SEBI.
Accordingly, IAs shall charge fees from the clients in either of the two
modes:
(A) Assets under Advice (AUA) mode
(a) The maximum fees that may be charged under this mode shall
not exceed 2.5 percent of AUA per annum per client across all
services offered by IA.
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(b) IA shall be required to demonstrate AUA with supporting
documents like demat statements, unit statements etc. of the
client.
(c) Any portion of AUA held by the client under any pre-existing
distribution arrangement with any entity shall be deducted from
AUA for the purpose of charging fee by the IA.
(B) Fixed fee mode
The maximum fees that may be charged under this mode shall not
exceed INR 1,25,000 per annum per client across all services
offered by IA.
General conditions under both modes
(a) In case “family of client” is reckoned as a single client, the fee as
referred above shall be charged per “family of client”.
(b) IA shall charge fees from a client under any one mode i.e. (A) or (B)
on an annual basis. The change of mode shall be effected only after
12 months of on boarding/last change of mode.
(c) If agreed by the client, IA may charge fees in advance. However,
such advance shall not exceed fees for 2 quarters.
In the event of pre-mature termination of the IA services in terms of
agreement, the client shall be refunded the fees for unexpired
period. However, IA may retain a maximum breakage fee of not
greater than one quarter fee.
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Investment Advisory Services for Accredited Investors4
In case of accredited investors, the limits and modes of fees payable to
the IA shall be governed through bilaterally negotiated contractual
terms and the provisions of clause 1.2(iii) shall not be applicable.
(iv) Qualification and certification requirement
Regulation 7 of the IA Regulations specifies the minimum qualification
and certification requirements for IAs. Further, in terms of second
proviso of regulation 7 (1), existing individual IAs above fifty years of
age (as on September 30,2020) shall not be required to comply with the
qualification and experience requirements specified under Regulation
7(1)(a) and 7(1)(b) of the IA Regulations. However, such IAs shall hold
National Institute of Securities Market (NISM) accredited certifications
and comply with other conditions as specified under Regulation 7(2) of
the IA Regulations at all times.
(v) Registration as Non Individual Investment Advisor
a. As per Regulation 13(e) of the IA Regulations, an individual IA shall
apply for registration as non-individual investment adviser on or
before reaching 150 clients.
b. Such application for registration shall be made in FORM-A as per
the IA Regulations, along with the requisite fee and same shall be
assessed in accordance with the provisions of the IA Regulations
and amendments thereto as well as circulars issued thereunder.
c. Once number of clients reaches 150 and till grant of registration as
a non-individual IA, Individual IA shall not on-board fresh clients.
4 Reference: Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/694 dated December 21, 2021
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However, during the period of examination of application by SEBI,
individual IA shall continue to service existing clients. In case the
aforesaid IA does not get registration as non-individual IA, such IA
shall continue the advisory activities as an Individual IA while
ensuring that the numbers of clients does not exceed 150 in total.
d. As per Regulation 13(e) of the IA Regulations, existing Individual IA
having more than 150 clients as on September 30, 2020 shall not
on-board fresh clients and such Individual IA shall apply for
registration as non-individual IA latest by April 01, 2021. However,
during the period of examination of application by SEBI, individual
IA shall continue to service existing clients.
(vi) Maintenance of record
Regulation 19(1) of the IA Regulations provides that IA shall maintain
records with respect to his activities as an IA. In this regard, it is clarified
that:
a. IA shall maintain records of interactions, with all clients including
prospective clients (prior to onboarding), where any conversation
related to advice has taken place inter alia, in the form of:
i. Physical record written & signed by client,
ii. Telephone recording,
iii. Email from registered email id,
iv. Record of SMS messages,
v. Any other legally verifiable record.
b. Such records shall begin with first interaction with the client and
shall continue till the completion of advisory services to the client.
c. IAs shall be required to maintain these records for a period of five
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years. However, in case where dispute has been raised, such
records shall be kept till resolution of the dispute or if SEBI desires
that specific records be preserved, then such records shall be kept
till further intimation from SEBI.
(vii) Audit
a. As per regulation 19(3) of the IA Regulations, IA shall ensure that
annual audit in respect of compliance of the IA Regulations and
circulars issued thereunder is conducted. The audit shall be
completed within six months from the end of each financial year.
b. The adverse findings of the audit, if any, along with action taken
thereof duly approved by the individual IA/management of the non-
individual IA, shall be reported to respective SEBI office (based on
the registered address of IA) within a period of one month from the
date of the audit report but not later than October 31st of each year
for the previous financial year starting with the financial year ending
March 31,2021.
(viii) Risk profiling and suitability for non-individual clients
a. Regulations 16 and 17 of the IA Regulations mandate risk profiling
and suitability for all categories of clients.
b. In order to further enhance the risk profiling and encompass suitable
factors in case of non-individual clients, IA shall use the investment
policy as approved by board/management team of such non-
individual clients for risk profiling and suitability analysis.
c. The discretion to share the investment policy/relevant excerpts of
the policy shall lie with the non-individual client. However, IA shall
have discretion not to onboard non-individual clients if they are
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unable to do risk profiling of the non-individual client in the absence
of investment policy.
(ix) Display of details on website and in other communication channels
In order to protect the interest of investors and bring more transparency
in the functioning of the IAs, the IAs shall display the following
information prominently on its website, mobile app, printed or electronic
materials, know your client forms, client agreements and other
correspondences with the clients:
• Complete name of Investment Adviser as registered with SEBI,
• Type of Registration-Individual, Non-Individual,
• Registration number, validity of registration,
• Complete address with telephone numbers,
• Contact details of the Principal Officer –contact no, email id etc.,
• Corresponding SEBI regional/local office address.
1.3. Applicability
Client level segregation of advisory and distribution activities, agreement and
fees to be charged are aligned together.
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II. MEASURES TO STRENGTHEN THE CONDUCT OF INVESTMENT
ADVISERS
2. Measures to strengthen the conduct of Investment Advisers5
2.1 Restriction on free trial
As per the IA Regulations, investment advice can be given after completing
risk profiling of the client and ensuring suitability of the product. It has come
to the notice that IAs are providing advice on free trial basis without
considering risk profile of the client. Hence the IAs shall not provide free trial
for any products/services to prospective clients. Further, IAs shall not accept
part payments (where some part of the fee is paid in advance) for any
product/service.
2.2 Proper risk profiling and consent of client on risk profiling
Risk profiling of the client is essential to provide advice on suitable product
based on various criteria like income, age, securities market experience etc.
Registered IAs shall provide investment advice only after completing the
following steps: a. Complete the risk profile of the client based on information
provided by the client. b. Obtain consent of the client on completed risk
profile either through registered email or physical document.
2.3 Receiving fees though banking channel only
It is observed that the IAs are receiving advisory fee in the form of cash
deposit in their bank accounts or through payment gateways which does not
provide proper audit trail of fees received from the clients. To bring
transparency in dealing with the clients, IAs shall accept fees strictly by
account payee crossed cheques / demand draft or by way of direct credit
5 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2019/169 dated December 27, 2019
Page 13 of 66
into their bank account through NEFT/ RTGS/IMPS/UPI. It is clarified that,
IAs shall not accept cash deposits.
2.4 Display of complaints status on website
In order to bring more transparency and enable the investors to take
informed decision regarding availing of advisory services, IAs shall display
the following information on the homepage (without scrolling) of their
website/mobile app. The information should be displayed properly using font
size of 12 or above and made available on monthly basis (within 7 days of
end of the previous month) in a format as per Annexure C6:
III. ADMINISTRATION AND SUPERVISION OF INVESTMENT ADVISERS
3. Administration and Supervision of Investment Advisers7
3.1 SEBI, vide Circular SEBI/HO/MRD/DSA/CIR/P/2016/113 dated October 19,
2016, allowed registered IAs to use infrastructure of the stock exchanges to
purchase and redeem mutual fund units directly from Asset Management
Companies on behalf of their clients.
3.2 As per Regulation 14 of the IA Regulations, SEBI can recognize any
body/body corporate for the purpose of regulating IAs. It further provides that
SEBI may, at the time of recognition of such body or body corporate,
delegate administration and supervision of IAs to such body or body
corporate on such terms and conditions as may be specified.
3.3 Further, the second proviso to Regulation 38 (2) of the Securities Contracts
6 Reference: Circular No. SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0686 dated December 13, 2021
7 Reference: Circular No. SEBI/HO/IMD/DF1/CIR/P/2020/148 dated August 06, 2020
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(Regulation) (Stock Exchanges and Clearing Corporations) Regulations,
2018 states, inter alia, that a recognized stock exchange may engage in
activities, whether involving deployment of funds or otherwise that are
unrelated or not incidental to its activity as a stock exchange, through a
separate legal entity and subject to approval of the Board.
3.4 Considering the growing number of registered IAs and the above mentioned
provisions, it was decided to recognize a wholly-owned subsidiary of the
stock exchange (stock exchange subsidiary) to administer and supervise IAs
registered with SEBI.
A. Criteria for grant of recognition
The recognition of stock exchange subsidiary, in terms of the aforesaid
Regulation 14, shall be based on the eligibility of the parent entity, i.e.
the stock exchange, for which the following eligibility criteria is laid down:
i. Number of years of existence: Minimum 15 years.
ii. Stock exchanges having a minimum networth of INR 200 crores.
iii. Stock exchanges having nation-wide terminals.
iv. Investor grievance redressal mechanism including Arbitration.
v. Capacity for investor service management gauged through reach of
Investor Service Centers (ISCs): Stock exchanges having ISCs in at
least 20 cities.
B. Setting up of requisite systems by stock exchanges for the purpose
i. The stock exchange shall either form a subsidiary or designate an
existing subsidiary for the purpose of regulating IAs.
ii. The subsidiary shall include in its MoA, AoA and bye-laws, requisite
provisions to fulfil the below mentioned responsibilities.
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iii. The subsidiary shall put in place systems/process for grievance
redressal, administrative action against IAs, governing IAs,
maintaining data, sharing of information with SEBI etc.
iv. The subsidiary shall have the necessary infrastructure like adequate
office space, equipment and manpower to effectively discharge the
below mentioned activities. Infrastructure may be shared with other
group entities where required.
C. Responsibilities of subsidiary of a stock exchange
The subsidiary of a stock exchange shall have following responsibilities:
i. Supervision of IAs including both on-site and offsite
ii. Grievance redressal of clients and IAs
iii. Administrative action including issuing warning and referring to SEBI
for enforcement action
iv. Monitoring activities of IAs by obtaining periodical reports
v. Submission of periodical reports to SEBI
vi. Maintenance of database of IAs.
4. Framework for administration and supervision of Investment Advisers
under the Securities and Exchange Board of India (Investment Advisers)
Regulations, 20138
4.1 As per Regulation 14 of the IA Regulations, SEBI may, inter-alia, recognize
any body or body corporate for the purpose of regulating the IAs and
delegate administration and supervision of the IAs on such terms and
conditions as may be specified. Accordingly, an entity granted recognition
under the aforesaid Regulation shall be designated as “Investment Adviser
Administration and Supervisory Body” (“IAASB”) and shall be entrusted with
the administration and supervision of IAs.
8 Reference: Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/579 dated June 18, 2021
Page 16 of 66
4.2 In this regard, BSE Administration & Supervision Limited (BASL), a wholly
owned subsidiary of BSE Limited, has been granted recognition as IAASB
for a period of three years from June 01, 2021. The details may be perused
in the Press Release issued by SEBI on June 14, 2021 and available at
https://www.sebi.gov.in/media/press-releases/jun-2021/bse-administration-
and-supervision-limited-granted-recognition-for-administration-and-
supervision-of-investment-advisers_50540.html, which also provides a link
for the Standard Operating Procedure (SOP) and the Frequently Asked
Questions (FAQs) issued by BASL.
4.3 IAASB shall inter-alia have following responsibilities:
i. Supervision of IAs including both on-site and offsite
ii. Grievance redressal of clients and IAs
iii. Administrative action including issuing warning and referring to SEBI for
enforcement action
iv. Monitoring activities of IAs by obtaining periodical reports
v. Submission of periodical reports to SEBI
vi. Maintenance of database of IAs
4.4 The Board of the IAASB shall, at all times, be chaired by a Public Interest
Director and shall also have, at all times, a Director who will bring investor
perspective.
4.5 SEBI shall continue to concurrently administer and supervise all registered
IAs and IAASB shall be subject to periodic inspection by SEBI.
4.6 Pursuant to grant of aforementioned recognition, SEBI registered IAs are
required to ensure compliance with the following:
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i. Membership of IAASB
In order to ensure compliance with Regulation 6(n) of the IA Regulations
and to keep their registration in force, existing IAs shall seek
membership of IAASB in such manner as may be specified by the
IAASB.
ii. Payment of fees
a. The fees payable to SEBI has been modified by way of amendment
to the IA Regulations, with effect from April 01, 2021, details of the
same are available at https://www.sebi.gov.in/legal/regulations/jan-
2021/securities-and-exchange-board-of-india-investment-advisers-
amendment-regulations-2021_49541.html and
https://www.sebi.gov.in/legal/regulations/jan-2021/corrigendum-to-
the-securities-and-exchange-board-of-india-investment-advisers-
amendment-regulations-2021_48848.html.
b. Accordingly, unless specified otherwise by SEBI, existing IAs shall
be required to pay membership fees to IAASB in a manner
prescribed by IAASB, at the time of payment of fees to SEBI as per
Second Schedule to the IA Regulations, to keep their registration in
force. Any subsequent payment of membership fees shall be in the
manner specified by IAASB.
For details with respect to membership process, membership fee
structure as well as contact details of IAASB, FAQs under the link
provided in the Press release issued by SEBI upon recognition of
IAASB (please refer clause 4.2), may be referred.
iii. Reporting
All SEBI registered IAs shall submit periodic reports to IAASB in such
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manner as may be specified by IAASB.
IV. TECHNOLOGY RELATED
5. Advisory for Financial Sector Organizations regarding Software as a Service
(SaaS) based solutions9
5.1 Ministry of Electronics & Information Technology, Govt. of India (MoE&IT),
has informed SEBI that the financial sector institutions are availing or
thinking of availing Software as a Service (SaaS) based solution for
managing their Governance, Risk & Compliance (GRC) functions so as to
improve their cyber Security Posture. As observed by MoE&IT, though SaaS
may provide ease of doing business and quick turnaround, but it may bring
significant risk to health of financial sector as many a time risk and
compliance data of the institution moves beyond the legal and jurisdictional
boundary of India due to nature of shared cloud SaaS, thereby posing risk
to the data safety and security.
5.2 In this regard, Indian Computer Emergency Response Team (CERT-in) has
issued an advisory for Financial Sector organizations. The advisory has been
forwarded to SEBI for bringing the same to the notice of financial sector
organization. The advisory can be viewed at Annexure D.
5.3 It is advised to ensure complete protection and seamless control over the
critical systems at your organizations by continuous monitoring through
direct control and supervision protocol mechanisms while keeping the critical
data within the legal boundary of India.
9 Reference: Circular No. SEBI/HO/MIRSD2/DOR/CIR/P/2020/221 dated November 03, 2020. SEBI
vide e-mail dated November 14, 2022 communicated the extended timeline for compliance by IAs to
BSE Administration & Supervision Limited
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5.4 The compliance of the advisory shall be reported half yearly by IAs to SEBI
with an undertaking, “Compliance of the SEBI circular for Advisory for
Financial Sector Organizations regarding Software as a Service (SaaS)
based solutions has been made.”
V. INVESTOR COMPLAINTS
6. Redressal of investor grievances through SEBI Complaints Redress system
(SCORES) Platform10
6.1. SEBI has been taking various measures to create awareness among
investors about grievance mechanisms available to them through workshops
as well as through print and electronic media.
6.2. As an additional measure and for information of all investors who deal/
invest/ transact in the market, the IAs shall prominently display in their offices
the following information about the grievance redressal mechanism available
to investors:
Dear Investor,
In case of any grievance / complaint against the investment adviser:
• Please contact Compliance Officer of the investment adviser (Name and
Address) / email-id (xxx.@email.com) and Phone No. - 91- XXXXXXXXXX.
10 Reference: Circular No.CIR/MIRSD/3/2014 dated August 28, 2014 and
SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 07, 2022
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• You may also approach CEO / Partner / Proprietor (Name) / email- id
(xxx.@email.com) and Phone No. - 91-XXXXXXXXXX.
• If not satisfied with the response of the investment adviser you can lodge your
grievances with SEBI at http://scores.gov.in or you may also write to any of
the offices of SEBI. For any queries, feedback or assistance, please contact
SEBI Office on Toll Free Helpline at 1800 22 7575 / 1800 266 7575.
6.3. IAs are also advised to refer to Master Circular issued by SEBI on the
redressal of investor grievances through the SEBI Complaints Redress
System (SCORES) platform at the following link:
https://www.sebi.gov.in/legal/master-circulars/nov-2022/master-circular-on-
the-redressal-of-investor-grievances-through-the-sebi-complaints-redress-
system-scores-platform_64742.html
7. Publishing Investor Charter and disclosure of Investor Complaints by
Investment Advisers on their websites/mobile applications11
7.1 In order to facilitate investor awareness about various activities which an
investor deals with while availing the services provided by IAs, SEBI has
developed an Investor Charter for Investment Advisers. This Charter is a
brief document containing details of service provided to investors, their
rights, dos and don’ts, responsibilities, investor grievance handling
mechanism and timelines thereof etc., at one single place, in a lucid
language, for ease of reference.
7.2 All registered IAs are advised to bring to the notice of their clients the Investor
Charter as provided at Annexure B by prominently displaying on their
websites and mobile applications. IAs not having websites/mobile
applications shall, as a one-time measure, send Investor Charter to the
investors on their registered e-mail address.
11 Reference: Circular No. SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0686 dated December 13, 2021
Page 21 of 66
7.3 IAs shall disclose the details of investor complaints by 7th of the succeeding
month in the revised format as per Annexure C on a monthly basis. IAs not
having websites/mobile applications shall send status of Investor Complaints
to the investors on their registered email on a monthly basis.
7.4 Further, the IAs are advised to display link/option to lodge complaint with
them directly on their websites and mobile apps. Additionally, link to
SCORES website/ link to download mobile app (SEBI SCORES) may also
be provided.
7.5 The disclosure requirements under this clause came into effect from January
01, 2022.
VI. MISCELLANEOUS
8. Procedure for seeking prior approval for change in control12
8.1. Regulation 15(11) of the IA Regulations, IA shall obtain prior approval of
SEBI in case of change in control.
8.2. To streamline the process of providing approval to the proposed change in
control of IA (hereinafter referred as IA or applicant), it has been decided as
under:
i. IA shall make an online application to SEBI for prior approval through
the SEBI Intermediary Portal (‘SI Portal’) (https://siportal.sebi.gov.in).
12 Reference: Circular No. SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2022/163 dated November 28,
2022
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ii. The online application in SI portal shall be accompanied by the following
information/ declaration/ undertaking about itself, the acquirer(s)/ the
person(s) who shall have the control and the directors/ partners of the
acquirer(s)/ the person(s) who shall have the control:
a. Current and proposed shareholding pattern of the applicant
b. Whether any application was made in the past to SEBI seeking
registration in any capacity but was not granted? If yes, details
thereof.
c. Whether any action has been initiated/ taken under Securities
Contracts (Regulation) Act, 1956 (SCRA)/ Securities and Exchange
Board of India Act, 1992 (SEBI Act) or rules and regulations made
thereunder? If yes, the status thereof along with the corrective action
taken to avoid such violations in the future. The acquirer/ the person
who shall have the control shall also confirm that it shall honour all
past liabilities/ obligations of the applicant, if any.
d. Whether any investor complaint is pending? If yes, steps taken and
confirmation that the acquirer/ the person who shall have the control
shall resolve the same.
e. Details of litigation(s), if any.
f. Confirmation that all the fees due to SEBI have been paid.
g. Declaration cum undertaking of the applicant and the acquirer/ the
person who shall have the control (in the format specified at
Annexure E), duly stamped and signed by their authorized
signatories that:
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i. there will not be any change in the Board of Directors of
incumbent, till the time prior approval is granted;
ii. pursuant to grant of prior approval by SEBI, the incumbent shall
inform all the existing investors/ clients about the proposed
change prior to effecting the same, in order to enable them to
take informed decision regarding their continuance or otherwise
with the new management; and
iii. the ‘fit and proper person’ criteria as specified in Schedule II of
Securities and Exchange Board of India (Intermediaries)
Regulations, 2008 are complied with.
h. In case the incumbent is a registered stock broker, clearing member,
depository participant, in addition to the above, it shall obtain
approval /NOC from all the stock exchanges/clearing
corporations/depositories, where the incumbent is a
member/depository participant and submit self-attested copy of the
same to SEBI.
iii. The prior approval granted by SEBI shall be valid for a period of six
months from the date of such approval within which the applicant shall
file application for fresh registration pursuant to change in control.
8.3. To streamline the process of providing approval to the proposed change in
control of an IA in matters which involve scheme(s) of arrangement which
needs sanction of the National Company Law Tribunal (“NCLT”) in terms of
the provisions of the Companies Act, 2013, the following has been decided:
i. The application seeking approval for the proposed change in control of
the IA shall be filed with SEBI prior to filing the application with NCLT.
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ii. Upon being satisfied with compliance of the applicable regulatory
requirements, an in-principle approval will be granted by SEBI;
iii. The validity of such in-principle approval shall be three months from the
date issuance, within which the relevant application shall be made to
NCLT.
iv. Within 15 days from the date of order of NCLT, the IA shall submit an
online application in terms of clause 8.2 along with the following
documents to SEBI for final approval:
a. Copy of the NCLT Order approving the scheme;
b. Copy of the approved scheme;
c. Statement explaining modifications, if any, in the approved scheme
vis-à-vis the draft scheme and the reasons for the same; and
d. Details of compliance with the conditions/ observations, if any,
mentioned in the in-principle approval provided by SEBI.
9. Advertisement code and usage of brand name/trade name13
9.1. Investment Advisers shall ensure compliance with the advertisement code
as prescribed below:
a. Forms of communication:
i. Advertisement shall include all forms of communications, issued by
or on behalf of IA, that may influence investment decisions of any
investor or prospective investor.
13 Reference: Circular Nos. SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/51 dated April 05, 2023 and
SEBI/HO/MIRSD/ MIRSD-PoD-2/P/CIR/2023/52 dated April 06, 2023
Page 25 of 66
ii. The forms of communications, to which the advertisement code shall
be applicable, shall include pamphlets, circulars, brochures,
notices, research reports or any other literature, document,
information or material published, or designed for use in any
publication or displays (such as newspaper, magazine, sign
boards/hoardings at any location), in any electronic, wired or
wireless communication (such as electronic mail, text messaging,
messaging platforms, social media platforms, radio, telephone, or in
any other form over the internet) or over any other audio-visual form
of communication (such as television, tape recording, video tape
recordings, motion pictures) or in any other manner whatsoever.
b. Information/disclosures in the advertisement:
The information/disclosures that the advertisement shall contain, include
the following-
i. Name of the IA/RA as registered with SEBI, registered office
address, SEBI Registration No., logo/brand name/trade name of IA,
and CIN of the IA, if applicable.
ii. Information which is accurate, true and complete in unambiguous
and concise language.
iii. Standard warning in legible fonts (minimum 10 font size) which
states “Investment in securities market are subject to market risks.
Read all the related documents carefully before investing”. No
addition or deletion of words shall be made to/from the standard
warning.
iv. In audio-visual media based advertisements, the standard warning
in visual media based advertisement and accompanying voice over
reiteration shall be audible in a clear and understandable manner.
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For example, in standard warning both the visual and the voice over
reiteration containing 20 words running for at least 10 seconds may
be considered as clear and understandable.
v. Whenever the advertisement is being issued in a language other
than English, it will be ensured that the standard warning is
accurately translated in the language of the advertisement.
vi. In case the mode of advertisement is SMS/Message/Pop-up, social
media etc. and the details such as full name, logo/brand name, full
registered office address, SEBI registration number, membership
number of a SEBI recognized supervisory body and standard
disclaimer are not mentioned, then official website hyperlink should
be provided in such SMS/Message/Pop-up, etc. and the website
must contain all such details.
vii. In case any specific security/ securities are displayed in the
advertisement as examples, disclaimer that "The securities quoted
are for illustration only and are not recommendatory" should be
mentioned.
viii. Advertisements and communications/correspondences with clients
shall include the disclaimer that “Registration granted by SEBI,
membership of BASL and certification from NISM in no way
guarantee performance of the IA or provide any assurance of returns
to investors.”
c. Prohibitions in the advertisement:
The advertisement shall not contain:
i. Anything which is prohibited for publication under the law.
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ii. Statements which are false, misleading, biased or deceptive, based
on assumptions or projections.
iii. Any misleading or deceptive testimonials.
iv. Statements which, directly or by implication or by omission, may
mislead the investor.
v. Any statement likely to be misunderstood or likely to disguise the
significance of the same or any other statement contained in the
advertisement.
vi. Any statement designed to exploit the lack of experience or
knowledge of the investors.
vii. Any statement that is exaggerated or is inconsistent with or
unrelated to the nature and risk and return profile of the product.
viii. Extensive use of technical or legal terminology or complex language
and the inclusion of excessive details which may distract the
investors.
ix. Reference to any report, analysis, or service as free, unless it
actually is free and without condition or obligation.
x. Any promise or guarantee of assured or risk free return to the
investors.
The advertisement shall not imply any assured returns or minimum
returns or target return or percentage accuracy or service provision
till achievement of target returns or any other nomenclature that
gives the impression to the client that the investment advice is risk-
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free and/or not susceptible to market risks and/or that it can generate
returns with any level of assurance.
xi. Any statement which directly or indirectly discredits other
advertisements or intermediaries or makes unfair comparisons or
ascribes any qualitative advantage over other intermediaries directly
or indirectly.
xii. Reference to past performance of the IA.
xiii. Superlative terms such as “Best”, “No. 1”, Top Adviser, “Leading”,
“One of the best amongst market leaders”, etc. so as to provide any
endorsement of quality or standing of the IA. However, factual
details of awards received by the IA from independent organizations
may be included.
xiv. Advertisements shall not include SEBI Logo.
d. Other compliances/requirements:
i. Prior approval for the advertisement/material shall be obtained from
SEBI recognized supervisory body (BSE Administration &
Supervision Ltd. (BASL)) before issue.
ii. In the event of suspension of any IA by SEBI and/or by SEBI
recognized supervisory body, the IA so suspended shall not issue
any advertisement either singly or jointly with any other IA, during
the period of suspension.
iii. The IA/RA shall not engage in games, leagues, schemes,
competitions etc. which may involve distribution of prize monies,
medals, gifts, etc.
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iv. These norms shall be applicable to any other
investment/research/consultancy agency associated with the IA
concerned and issuing advertisement wherein the IA has been
named in the advertisement.
v. Copy of the advertisement shall be retained by IA for a period of five
years in terms of Regulation 19(2) of the IA Regulations.
vi. Any additional guidelines as may be specified by SEBI or SEBI
recognized supervisory body from time to time.
9.2. In order to ensure the transparency in usage of brand name/trade name/logo,
IA/RA shall ensure that:
i. The information such as name of the IA as registered with SEBI, its logo,
its registration number and its complete address with telephone numbers
shall be prominently displayed on portal/web site, if any, notice board,
display boards, advertisements, publications, know your client forms and
client agreements.
ii. The information such as name of the IA as registered with SEBI, its logo,
its registration number, its complete address with telephone numbers,
the name of the compliance officer, his telephone number and e-
mail address, the name, telephone number and e-mail address of
the grievance officer or the grievance redressal cell shall be displayed
prominently in statements or reports or any other form of
correspondence with the client.
iii. Disclaimer that “Registration granted by SEBI, membership of BASL and
certification from NISM in no way guarantee performance of the IA or
provide any assurance of returns to investors” shall be mentioned on
portal/web site, if any, notice board, display boards, advertisements,
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publications, know your client forms, client agreements, statements or
reports or any other form of correspondence with the client.
iv. SEBI logo shall not be used by IA.
9.3. The aforesaid provisions on advertisement code and usage of brand
name/trade name became applicable with effect from May 01, 2023.
10. Facilitating transaction in Mutual Fund schemes through the Stock
Exchange Infrastructure14
Registered IAs are allowed to use infrastructure of the recognized stock
exchanges to purchase and redeem mutual fund units directly from Mutual Fund/
Asset Management Companies on behalf of their clients, including direct plans.
11. Unauthenticated news circulated by SEBI Registered Market Intermediaries
through various modes of communication15
IAs are directed that:
a. Proper internal code of conduct and controls should be put in place.
b. Employees/temporary staff/voluntary workers etc. employed/working in the
Offices of market intermediaries do not encourage or circulate rumours or
unverified information obtained from client, industry, any trade or any other
sources without verification.
c. Access to Blogs/ Chat forums/Messenger sites etc. should either be restricted
under supervision or access should not be allowed.
14 Reference: Circular No. SEBI/HO/MRD/DSA/CIR/P/2016/113 dated October 19, 2016
15 Reference: Circular No. CIR/ISD/1/2011 dated March 23, 2011
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d. Logs for any usage of such Blogs/Chat forums/Messenger sites (called by any
nomenclature) shall be treated as records and the same should be maintained
as specified by the IA Regulations.
e. Employees should be directed that any market related news received by them
either in their official mail/personal mail/blog or in any other manner, should
be forwarded only after the same has been seen and approved by the IA’s
Compliance Officer. If an employee fails to do so, he/she shall be deemed to
have violated the various provisions contained in SEBI Act/Rules/Regulations
etc. and shall be liable for action. The Compliance Officer shall also be held
liable for breach of duty in this regard16.
12. Guidelines on Outsourcing of Activities by Intermediaries17
12.1. SEBI Regulations for various intermediaries require that they shall render at
all times high standards of service and exercise due diligence and ensure
proper care in their operations.
12.2. It has been observed that often the intermediaries resort to outsourcing with
a view to reduce costs, and at times, for strategic reasons.
12.3. Outsourcing may be defined as the use of one or more than one third party
– either within or outside the group - by a registered intermediary to perform
the activities associated with services which the intermediary offers.
12.4. Principles for Outsourcing
The risks associated with outsourcing may be operational risk, reputational
risk, legal risk, country risk, strategic risk, exit-strategy risk, counter party
risk, concentration and systemic risk. The principles for outsourcing are
16 Circular CIR/ISD/2/2011 dated March 24, 2011.
17 Circular CIR/MIRSD/24/2011 dated December 15, 2011.
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given in Annexure F.
12.5. Activities that shall not be Outsourced:
The intermediaries desirous of outsourcing their activities shall not, however,
outsource their core business activities and compliance functions. An
example of core business activity may be – execution of orders and
monitoring of trading activities of clients in case of stock brokers. Regarding
Know Your Client (KYC) requirements, the intermediaries shall comply with
the provisions of SEBI {KYC (Know Your Client) Registration Agency}
Regulations, 2011 and Guidelines issued thereunder from time to time.
12.6. Other Obligations:
Reporting to Financial Intelligence Unit (FIU) - The intermediaries shall
be responsible for reporting of any suspicious transactions / reports to FIU
or any other competent authority in respect of activities carried out by the
third parties.
13. Framework for Regulatory Sandbox18
13.1. The Objective of Regulatory Sandbox is to grant certain facilities and
flexibilities to the entities regulated by SEBI so that they can experiment with
FinTech solutions in a live environment and on limited set of real users for a
limited time frame.
13.2. The guidelines pertaining to the functioning of the Regulatory Sandbox are
available at the link below:
18 Reference: Circular No. SEBI/HO/ITD/ITD/CIR/P/2021/575 dated June 14, 2021 and
SEBI/HO/MIRSD/MIRSD_IT/P/CIR/2021/0000000658 dated November 16, 2021
Page 33 of 66
https://www.sebi.gov.in/legal/circulars/jun-2021/revised-framework-for-
regulatory-sandbox_50521.html and
https://www.sebi.gov.in/legal/circulars/nov-2021/framework-for-regulatory-
sandbox_53982.html
14. General Guidelines for dealing with Conflicts of Interest of intermediaries
and their Associated Persons in Securities Market.19
14.1. All intermediaries are presently governed by the provisions for avoidance of
conflict of interest as mandated in the regulations read with relevant circulars
issued from time to time by SEBI. On the lines of Principle 8 of the
International Organisation of Securities Commissions (IOSCO) Objectives
and Principles of Securities Regulations, it has been decided to put in place
comprehensive guidelines to collectively cover such intermediaries, for
elimination of their conflict of interest, as detailed hereunder.
14.2. Intermediaries shall adhere to these guidelines for avoiding or dealing with
or managing conflict of interest. They shall be responsible for educating their
associated persons for compliance of these guidelines.
14.3. For the purpose of these guidelines "associated persons" shall have the
same meaning as defined in Securities and Exchange Board of India
(Certification of Associated Persons in the Securities Markets) Regulations,
2007.
14.4. Intermediaries and their associated persons shall,
a. lay down, with active involvement of senior management, policies and
internal procedures to identify and avoid or to deal or manage actual or
potential conflict of interest, develop an internal code of conduct
governing operations and formulate standards of appropriate conduct in
19 Reference: Circular CIR/MIRSD/5/2013 dated August 27, 2013.
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the performance of their activities, and ensure to communicate such
policies, procedures and code to all concerned;
b. at all times maintain high standards of integrity in the conduct of their
business;
c. ensure fair treatment of their clients and not discriminate amongst them;
d. ensure that their personal interest does not, at any time conflict with their
duty to their clients and client’s interest always takes primacy in their
advice, investment decisions and transactions;
e. make appropriate disclosure to the clients of possible source or potential
areas of conflict of interest which would impair their ability to render fair,
objective and unbiased services;
f. endeavor to reduce opportunities for conflict through prescriptive
measures such as through information barriers to block or hinder the
flow of information from one department/ unit to another, etc.;
g. place appropriate restrictions on transactions in securities while handling
a mandate of issuer or client in respect of such security so as to avoid
any conflict;
h. not deal in securities while in possession of material non published
information;
i. not to communicate the material non published information while dealing
in securities on behalf of others;
j. not in any way contribute to manipulate the demand for or supply of
securities in the market or to influence prices of securities;
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k. not have an incentive structure that encourages sale of products not
suiting the risk profile of their clients;
l. not share information received from clients or pertaining to them,
obtained as a result of their dealings, for their personal interest;
14.5. The Boards of intermediaries shall put in place systems for implementation
of the aforementioned guidelines and provide necessary guidance enabling
identification, elimination or management of conflict of interest situations.
The Boards shall review the compliance of the above guidelines periodically.
14.6. The said guidelines shall be in addition to the provisions, if any, contained in
respective regulations/ circulars issued by the Board from time to time
regarding dealing with conflict of interest, in respect of intermediaries.
15. Approach to securities market data access and terms of usage of data
provided by data sources in Indian securities market20
15.1. IAs are advised to make note of the following:
“As far as the data provided by various data sources in Indian securities
markets pursuant to regulatory mandates for reporting and disclosure in
public domain are concerned, such data should be made available to users,
‘free of charge’ both for ‘viewing’ the data as also for download in the format
as specified by regulatory mandate for reporting, as well as their usage for
the value addition purposes.”
15.2. Further, apart from the data made available free of cost, data which is
chargeable should be appropriately identified as such in public domain.
20 Reference: Circular SEBI/HO/DEPA-III/DEPA-III_SSU/P/CIR/2022/25 dated Feb 25,2022
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16. Reporting Requirements under Foreign Account Tax Compliance Act21
16.1. India joined the Multilateral Competent Authority Agreement (MCAA) on
Automatic Exchange of Financial Account Information on June 03, 2015. In
terms of the MCAA, all countries which are signatory to MCAA, are obliged
to exchange a wide range of financial information after collecting the same
from financial institutions in their country / jurisdiction.
16.2. On July 09, 2015, the Governments of India and United States of America
(USA) signed an agreement to improve international tax compliance and to
implement the Foreign Account Tax Compliance Act (FATCA) in India. The
USA enacted FATCA in 2010 to obtain information on accounts held by US
taxpayers in other countries. As per the aforesaid agreement, foreign
financial institutions (FFIs) in India will be required to report tax information
about US account holders / taxpayers directly to the Indian Government
which will, in turn, relay that information to the U.S. Internal Revenue Service
(IRS).
16.3. For implementation of the MCAA and agreement with USA, the Government
of India has made necessary legislative changes to Section 285BA of the
Income Tax Act, 1961. Further, the Government of India has notified Rules
114F to 114H (herein after referred to as “the Rules”) under the Income Tax
Rules, 1962 and form No. 61B for furnishing of statement of reportable
account specified in the Rules. The Rule is available at
http://www.incometaxindia.gov.in/communications/notification/notification%
20no.%2062%20dated%2007-08-2015.pdf
16.4. A “Guidance Note on implementation of Reporting Requirements under
Rules 114F to 114H of the Income Tax Rules” as issued by the Department
of Revenue, Ministry of Finance vide F.No.500/137/2011-FTTR-III dated
21Reference: Circular CIR/MIRSD/2/2015 dated August 26, 2015 and Circular CIR/MIRSD/3/2015
dated September 10, 2015.
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August 31, 2015 is available at
http://www.incometaxindia.gov.in/communications/notification/guidance_not
es_on_im plementation_31_08_2015.pdf, for information and necessary
action.
16.5. IAs shall take necessary steps to ensure compliance with the requirements
specified in the aforesaid Rules after carrying out necessary due diligence.
17. Guidelines on Anti-Money Laundering (AML) Standards and Combating the
Financing of Terrorism (CFT) / Obligations of Securities Market
Intermediaries under the Prevention of Money Laundering Act, 2002 and
Rules framed there under
IAs are advised to refer to SEBI’s Master Circular issued on February 03, 2023
with respect to ‘Guidelines on Anti-Money Laundering (AML) Standards and
Combating the Financing of Terrorism (CFT) /Obligations of Securities Market
Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules
framed there under’ available at the following link:
https://www.sebi.gov.in/legal/master-circulars/feb-2023/guidelines-on-anti-
money-laundering-aml-standards-and-combating-the-financing-of-terrorism-cft-
obligations-of-securities-market-intermediaries-under-the-prevention-of-money-
laundering-act-2002-a-_67833.html
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VII. REPORTING REQUIREMENTS
1. Complaint Data to be displayed by IAs on their website/ mobile application
by 07th of the succeeding month
Formats for investors complaints data to be disclosed monthly by IAs on their
website/mobile application:
Data for the month ending -_____________
Sr. Received Pending Recei Resol Total Pending Average
No. from at the ved ved * Pending complaints Resolution
end of # > 3 months time^ (in
last days)
month
1 Directly from
Investors
2 SEBI
(SCORES )
3 Other
Sources (if
any)
Grand Total
* Inclusive of complaints of previous months resolved in the current month.
# Inclusive of complaints pending as on the last day of the month
^ Average Resolution time is the sum total of time taken to resolve each complaint in
days, in the current month divided by total number of complaints resolved in the
current month.
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Trend of monthly disposal of complaints
Sr. Month Carried forward from Received Resolved* Pending#
No. previous month
1 April, YYYY
2 May, YYYY
3 June, YYYY
4 ……………..
5 March, YYYY
Grand Total
* Inclusive of complaints of previous months resolved in the current month. #Inclusive
of complaints pending as on the last day of the month.
Trend of annual disposal of complaints
Sr. Year Carried forward Received Resolved* Pending#
No. from previous year
1 2018-19
2 2019-20
3 2020-21
4 20XX-XX
Grand Total
* Inclusive of complaints of previous years resolved in the current year.
# Inclusive of complaints pending as on the last day of the year.
2. Undertaking on compliance of the advisory for Financial Sector
Organizations regarding Software as a Service (SaaS) based solutions to be
submitted half yearly
The compliance of the advisory shall be reported by IA to SEBI with an
undertaking, “Compliance of the SEBI circular for Advisory for Financial Sector
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Organizations regarding Software as a Service (SaaS) based solutions has been
made.”
3. To conduct annual audit and submit a report and adverse findings, if any
In terms of regulation 19(3) of the IA Regulations, IA is required to conduct annual
audit in respect of compliance with the IA regulations and circulars issued
thereunder from a member of Institute of Chartered Accountants of India or
Institute of Company Secretaries of India within six months from the end of each
financial year. Submit a report of the same and adverse findings of the audit, if
any, along with action taken thereof duly approved by the individual
IA/management of the non-individual IA within a period of one month from the date
of the audit report but not later than October 31st of each year for the previous
financial year.
VIII. ANNEXURES
ANNEXURE A
TERMS AND CONDITIONS OF AGREEMENT BETWEEN IA AND THE CLIENT
Investment Adviser shall ensure that the following terms and conditions are incorporated in
the Investment Advisory Agreement:
1. Appointment of the Investment Adviser: In accordance with the applicable laws, client
hereby appoints, entirely at his / her / its risk, the Investment Adviser to provide the
required services in accordance with the terms and conditions of the agreement as
mandated under Regulation19(1)(d) of the Securities and Exchange Board of India
(Investment Advisers) Regulations, 2013.
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2. The agreement shall clearly provide for in the first page:
a) the consent of the client on the following understanding:
• “I / We have read and understood the terms and conditions of Investment
Advisory services provided by the Investment Adviser along with the fee
structure and mechanism for charging and payment of fee.
• Based on our written request to the Investment Adviser, an opportunity was
provided by the Investment Adviser to ask questions and interact with
‘person(s) associated with the investment advice’”.
b) Declaration from the Investment Adviser that:
• Investment Adviser shall neither render any investment advice nor charge any
fee until the client has signed this agreement.
• Investment Adviser shall not manage funds and securities on behalf of the
client and that it shall only receive such sums of monies from the client as are
necessary to discharge the client’s liability towards fees owed to the
Investment Adviser.
• Investment Adviser shall not, in the course of performing its services to the
client, hold out any investment advice implying any assured returns or
minimum returns or target return or percentage accuracy or service provision
till achievement of target returns or any other nomenclature that gives the
impression to the client that the investment advice is risk-free and/or not
susceptible to market risks and or that it can generate returns with any level
of assurance.
c) Fees specified under Investment Adviser Regulations and relevant circulars
issued thereunder. (to be specifically mentioned here)
d) Fees charged to the client. (to be specifically mentioned here)
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3. Scope of services: The services to be provided by the Investment Adviser to be
described in detail. However, the same shall be subject to the activities permitted under
the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013.
The Investment Adviser shall act in a fiduciary capacity towards its clients at all times.
4. Functions of the Investment Adviser: Functions, obligations, duties and responsibilities
of the Investment Adviser (including principal officer and all persons associated with
the investment advice), with specific provisions covering, inter alia,:
a) Terms of compliance with the Securities and Exchange Board of India (Investment
Advisers) Regulations, 2013 and its amendments, rules, circulars and notifications.
b) Compliance with the eligibility criteria as specified under the Investment Adviser
Regulations at all times.
c) Risk assessment procedure of client including their risk capacity and risk aversion.
d) Providing reports to clients on potential and current investments.
e) Maintenance of records i.e. client-wise KYC, risk assessment, analysis reports of
investment advice and suitability, terms and conditions document, related books
of accounts and a register containing list of clients along with dated investment
advice and its rationale in compliance with the Securities and Exchange Board of
India (Investment Advisers) Regulations, 2013.
f) Provisions regarding audit as per the Securities and Exchange Board of India
(Investment Advisers) Regulations, 2013.
g) Undertaking to abide by the Code of Conduct as specified in the Third Schedule of
the Securities and Exchange Board of India (Investment Advisers) Regulations,
2013.
5. Investment objective and guidelines:
a) Types of securities in which investment advice would be provided, including an
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undertaking from the investment adviser to recommend direct implementation of
advice i.e. through direct schemes/direct codes, and other client specifications /
restrictions on investments, if any.
b) Particulars regarding financial plan or model or strategy as agreed with the client
(based on the risk profiling conducted for the client, total AUA of the client and time
period for deployment).
c) Tax related aspects pertaining to investment advice and as applicable on the
investment adviser’s fee.
6. Risk Factors: A detailed statement of risks associated with each type of investment
covering the standard risks associated with each type of investment in securities and
investment products.
7. Validity of advisory services: Minimum period if any, and provision for renewal, if any,
along with terms and conditions for such renewal.
8. Amendments – The agreement may be amended by mutual written consent of the
parties.
9. Termination – This Agreement may be terminated under the following circumstances,
namely-
a) Voluntary/ mandatory termination by the Investment Adviser.
b) Voluntary/ mandatory termination by the client.
c) Suspension/ Cancellation of registration of Investment Adviser by SEBI.
d) Any other action taken by other regulatory body/ Government authority.
In case of a voluntary termination of the agreement, the client would be required to give
a 30 days prior written notice while the Investment Adviser would be required to give a
30 days prior written notice.
In case of suspension of the certificate of registration of the IA, the client may be
provided with the option to terminate the agreement.
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10. Implications of Amendments and termination: The implications of Amendment,
Termination and assignment, such as set off of fees received by the Investment
Adviser, refund of fees, completion/termination of investment-in-progress, transition
support obligations of the Investment Adviser, etc. shall also be provided in detail.
11. Relationship with related parties: The Investment Adviser to clearly declare that it is
carrying on its activities independently, at an arms-length basis with its related parties.
Disclosures of conflicts to be made.
12. Investment Adviser engaged in other activities:
i. The Investment Adviser (individual) to represent to the client that it maintains an
arms-length relationship between its activities as an investment adviser and other
activities and to covenant that this arm’s length relationship shall be maintained
throughout the tenure of advisory service;
ii. In case of Investment Adviser who are individuals:
(a) to represent that they shall not provide any distribution services.
(b) to represent that the family of an individual Investment Adviser shall not
provide distribution services to the client advised by the individual Investment
Adviser, for securities and investment products.
(c) to represent that they shall not provide investment advisory services, for
securities and investment products, to a client who is receiving distribution
services from other family members;
iii. The Investment Adviser (non-individual);
(a) to represent that they shall not provide any distribution services, for securities
and investment products, either directly or through their group to an advisory
client.
(b) to represent that they shall not provide investment advisory services, for
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securities and investment products, either directly or through their group to the
distribution client.
13. Representation to client: The investment adviser to ensure that it will take all consents
and permissions from the client prior to undertaking any actions in relation to the
securities or investment product advised by the investment adviser.
14. No right to seek Power of Attorney: The Investment Adviser to clearly declare that it
shall not seek any power of attorney or authorizations from its clients for implementation
of investment advice.
15. No conflict of interest: The Investment Adviser to clearly declare that it will disclose all
conflicts of interest as and when they arise and not derive any direct or indirect benefit
out of the client’s securities/investment products.
16. Maintenance of accounts and confidentiality: Investment Adviser shall be responsible
for maintenance of client accounts and data as mandated under the Securities and
Exchange Board of India (Investment Advisers) Regulations, 2013.
17. Terms of fees and billing:
(a) Provide specific details on the following:
i. The quantum and manner of payment of fees for investment advice rendered.
ii. Fee modalities and periodicity, by attaching a detailed fee schedule to the
agreement;
iii. Illustration(s) on how the fee will be determined;
iv. whether payment to be made in advance;
v. type of documents evidencing receipt of payment of fee;
vi. Periodicity of billing with clear date and service period
(b) The payment of fees shall be through a mode which shows traceability of funds.
Such modes may include account payee crossed cheque/ Demand Drafts or by
way of direct credit to the bank accounts through NEFT/ RTGS/ IMPS/ UPI or any
other mode specified by SEBI from time to time. However, the fees shall not be
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accepted in cash.
18. Liability of Investment Adviser: The agreement to clearly state that the Investment
Adviser shall not incur any liability by reason of any loss, which a client may suffer by
reason of any depletion in the value of the assets under advice, which may result by
reason of fluctuation in asset value, or by reason of non-performance or
underperformance of the securities/funds or any other market conditions.
19. Representations and covenants: Adequate and appropriate representations about
qualifications of the adviser, principal officer, persons associated with the investment
advice, receipt of all applicable approvals and consents (from regulatory / statutory
bodies, third party consents, corporate approvals etc.) and covenant to maintain them
throughout the validity of advisory service.
20. Death or Disability of client: Provisions in relation to continuation / termination of the
advisory service in event of client's death / disability, succession, nomination,
representation etc. to be incorporated.
21. Death or Disability of investment adviser: Every individual investment adviser must
appoint one of its legal heirs, executor, trustee, administrator of estate of the deceased
(the “Obligor”) as the person-in-charge in the event of investment adviser’s death /
disability. The agreement must set out the full name, PAN and contact details of such
Obligor. The agreement must disclose the steps to be taken by the Obligor in the event
of the above eventuality in order to ensure protection of interest of the clients and
redressal of clients’ claims, including but not limited to (a) giving notice to all clients of
the occurrence of the eventuality and confirmation of having taken charge over by the
Obligor (b) settlement of account with the client (fees payable and/or fees refundable),
(c) completion of transition of any outstanding business to another duly registered
investment adviser, (d) redressal of any outstanding or new disputes / claims of clients.
22. Settlement of disputes and provision for arbitration: Adequate provisions to cover
protection of acts done in good faith as well as for dispute resolution mechanism
including arbitration that may be specified under the Securities and Exchange Board of
India (Investment Advisers) Regulations, 2013.
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23. Adherence to grievance redressal timelines: Investment Adviser shall be responsible
to resolve the grievances within the timelines specified under SEBI circulars.
24. Severability: If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
25. Force Majeure: The Investment Adviser shall not be liable for delays or errors occurring
by reason of circumstances beyond its control, including but not limited to acts of civil
or military authority, national emergencies, work stoppages, fire, flood, catastrophe,
acts of God, insurrection, war, riot, or failure of communication or power supply. In the
event of equipment breakdowns beyond its control, the Advisor shall take reasonable
steps to minimize service interruptions but shall have no liability with respect thereto.
26. Miscellaneous: Each party agrees to perform such further actions and execute such
further agreements as are necessary to effectuate the purposes hereof.
ANNEXURE B
INVESTOR CHARTER IN RESPECT OF IAs
A. Vision and Mission Statements for investors
• Vision
Invest with knowledge & safety.
• Mission
Every investor should be able to invest in right investment products based
on their needs, manage and monitor them to meet their goals, access
reports and enjoy financial wellness.
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B. Details of business transacted by the Investment Adviser with respect to
the investors
• To enter into an agreement with the client providing all details including fee
details, aspect of Conflict of interest disclosure and maintaining
confidentiality of information.
• To do a proper and unbiased risk – profiling and suitability assessment of
the client.
• To obtain registration with Know Your Client Registration Agency (KRA) and
Central Know Your Customer Registry (CKYC).
• To conduct audit annually.
• To disclose the status of complaints in its website.
• To disclose the name, proprietor name, type of registration, registration
number, validity, complete address with telephone numbers and associated
SEBI regional/local Office details in its website.
• To employ only qualified and certified employees.
• To deal with clients only from official number
• To maintain records of interactions, with all clients including prospective
clients (prior to onboarding), where any conversation related to advice has
taken place.
C. Details of services provided to investors (No Indicative Timelines)
• Onboarding of Clients
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Sharing of agreement copy
o
Completing KYC of clients
o
• Disclosure to Clients
To provide full disclosure about its business, affiliations, compensation
o
in the agreement.
To not access client’s accounts or holdings for offering advice.
o
To disclose the risk profile to the client.
o
• To provide investment advice to the client based on the risk-profiling of the
clients and suitability of the client.
D. Details of grievance redressal mechanism and how to access it
1. In case of any grievance / complaint, an investor should approach the
concerned Investment Adviser and shall ensure that the grievance is
resolved within 30 days.
2. If the investor’s complaint is not redressed satisfactorily, one may lodge a
complaint with SEBI on SEBI’s 'SCORES' portal which is a centralized web
based complaints redressal system. SEBI takes up the complaints
registered via SCORES with the concerned intermediary for timely
redressal. SCORES facilitates tracking the status of the complaint.
3. With regard to physical complaints, investors may send their complaints to:
Office of Investor Assistance and Education, Securities and Exchange
Board of India, SEBI Bhavan, Plot No. C4-A, ‘G’ Block, Bandra-Kurla
Complex, Bandra (E), Mumbai - 400 051.
E. Expectations from the investors (Responsibilities of investors)
• Do’s
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i. Always deal with SEBI registered Investment Advisers.
ii. Ensure that the Investment Adviser has a valid registration certificate.
iii. Check for SEBI registration number.
Please refer to the list of all SEBI registered Investment Advisers
which is available on SEBI website in the following link:
https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognis
edFpi=yes&intm Id=13)
iv. Pay only advisory fees to your Investment Adviser. Make payments of
advisory fees through banking channels only and maintain duly signed
receipts mentioning the details of your payments.
v. Always ask for your risk profiling before accepting investment advice.
Insist that Investment Adviser provides advisory strictly on the basis of
your risk profiling and take into account available investment
alternatives.
vi. Ask all relevant questions and clear your doubts with your Investment
Adviser before acting on advice.
vii. Assess the risk–return profile of the investment as well as the liquidity
and safety aspects before making investments.
viii. Insist on getting the terms and conditions in writing duly signed and
stamped. Read these terms and conditions carefully particularly
regarding advisory fees, advisory plans, category of recommendations
etc. before dealing with any Investment Adviser.
ix. Be vigilant in your transactions.
x. Approach the appropriate authorities for redressal of your doubts /
grievances.
xi. Inform SEBI about Investment Advisers offering assured or guaranteed
returns.
• Don’ts
i. Don’t fall for stock tips offered under the pretext of investment advice.
ii. Do not provide funds for investment to the Investment Adviser.
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iii. Don’t fall for the promise of indicative or exorbitant or assured returns
by the Investment Advisers. Don’t let greed overcome rational
investment decisions.
iv. Don’t fall prey to luring advertisements or market rumors.
v. Avoid doing transactions only on the basis of phone calls or messages
from any Investment adviser or its representatives.
vi. Don’t take decisions just because of repeated messages and calls by
Investment Advisers.
vii. Do not fall prey to limited period discount or other incentive, gifts, etc.
offered by Investment advisers.
viii. Don’t rush into making investments that do not match your risk taking
appetite and investment goals.
ix. Do not share login credential and password of your trading and demat
accounts with the Investment Adviser.
ANNEXURE C
COMPLAINT DATA TO BE DISPLAYED BY IAs
Formats for investors complaints data to be disclosed monthly by IAs on their
website/mobile application:
Data for the month ending -_____________
Sr. Received Pending Received Resolved Total Pending Average
No. from at the * Pending complaints Resolution
end of # > 3months time^ (in
last days)
month
1 Directly from
Investors
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2 SEBI
(SCORES )
3 Other
Sources (if
any)
Grand Total
* Inclusive of complaints of previous months resolved in the current month.
# Inclusive of complaints pending as on the last day of the month
^ Average Resolution time is the sum total of time taken to resolve each complaint in days,
in the current month divided by total number of complaints resolved in the current month.
Trend of monthly disposal of complaints
Sr. Month Carried forward from Received Resolved* Pending#
No. previous month
1 April, YYYY
2 May, YYYY
3 June, YYYY
4 ……………..
5 March, YYYY
Grand Total
* Inclusive of complaints of previous months resolved in the current month.
# Inclusive of complaints pending as on the last day of the month
Trend of annual disposal of complaints
Sr. Year Carried forward Received Resolved* Pending#
No. from previous year
1 2018-19
2 2019-20
3 2020-21
4 20XX-XX
Grand Total
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* Inclusive of complaints of previous months resolved in the current month.
# Inclusive of complaints pending as on the last day of the month
ANNEXURE D
ADVISORY FOR FINANCIAL SECTOR ORGANIZATIONS SOFTWARE AS A
SERVICE (SaaS) BASED SOLUTION
TLP:AMBER
CERT-Fin Advisory- 201155100308
Advisory for Financial Sector Organisations- RBI and SEBI
Overview
It has been learnt that some of the financial sector institutions are availing or thinking of
availing Software as a Service (SaaS) based solution for managing their Governance,
Risk & compliance (GRC) functions so as to improve their cyber security posture.
Many a time the risk & compliance data of the institution moves cross border beyond the
legal and jurisdictional boundary of India due to the nature of shared cloud SaaS. While
SaaS may provide ease of doing business and quick turnaround, it also brings significant
risk to the overall health of India's financial sector with respect to data safety and security.
Description
If the following data sets fall in the hands of an adversary/cyber attacker, it may lead to
unprecedented increase in the attack surface area and weakening of Indian financial sector
infrastructure's overall resilience.
• Credit Risk Data
• liquidity Risk Data
• Market Risk Data
• System & Sub-System Information
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• Internal & Partner IP Schema
• Network Topography & Design
• Audit/Internal Audit Data
• System Configuration Data
• System Vulnerability Information
• Risk Exception Information
• Supplier Information & it's dependencies related Data
Solution
The Financial Sector organisations may be advised to protect such critical data using
layered defence approach and seamless protection against external or insider threat. The
organisations may also be advised to ensure complete protection & seamless control over
their critical system by continuous monitoring through direct control and supervision protocol
mechanisms while keeping such critical data within the legal boundary of India.
The organisations may also be requested to report back to their respective regulatory
authority regarding compliance to this advisory.
It is requested that you may kindly keep CERT-In informed of the actions taken and
periodically provide the updated compliance to this advisory.
(It may be noted that TLP Amber means: limited disclosure, restricted to participants'
organizations.
When should be used: Sources may use TLP:AMBER when information requires support
to be effectively acted upon, yet carries risks to privacy, reputation, or operations if
shared outside of the organizations involved.
How may it be shared: Recipients may only share TLP:AMBER information with members
of their own organization, and with clients or customers who need to know the information
to protect themselves or prevent further harm. Sources are at liberty to specify additional
intended limits of the sharing: these must be adhered to.)
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ANNEXURE E
DECLARATION CUM UNDERTAKING FOR SEEKING PRIOR APPROVAL FOR
CHANGE IN CONTROL
We M/s. (Name of the intermediary/the acquirer/person who shall have the control), hereby
declare and undertake the following with respect to the application for prior approval for change in
control of (name of the intermediary along with the SEBI registration no.):
1. The applicant/intermediary (Name) and its principal officer, the directors or managing
partners, the compliance officer and the key management persons and the promoters or
persons holding controlling interest or persons exercising control over the applicant, directly
or indirectly (in case of an unlisted applicant or intermediary, any person holding twenty
percent or more voting rights, irrespective of whether they hold controlling interest or exercise
control, shall be required to fulfill the ‘fit and proper person’ criteria) are fit and proper person
in terms of Schedule II of SEBI (Intermediaries) Regulations, 2008.
2. We bear integrity, honesty, ethical behaviour, reputation, fairness and character.
3. We do not incur following disqualifications mentioned in Clause 3(b) of Schedule II of SEBI
(Intermediaries) Regulations, 2008 i.e.
(i) No criminal complaint or information under section 154 of the Code of Criminal
Procedure, 1973 (2 of 1974) has been filed against us by the Board and which is
pending.
(ii) No charge sheet has been filed against us by any enforcement agency in matters
concerning economic offences and is pending.
(iii) No order of restraint, prohibition or debarment has been passed against us by the
Board or any other regulatory authority or enforcement agency in any matter
concerning securities laws or financial markets and such order is in force.
(iv) No recovery proceedings have been initiated by the Board against us and are
pending.
(v) No order of conviction has been passed against us by a court for any offence
involving moral turpitude.
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(vi) No winding up proceedings have been initiated or an order for winding up has been
passed against us.
(vii) We have not been declared insolvent.
(viii) We have not been found to be of unsound mind by a court of competent jurisdiction
and no such finding is in force.
(ix) We have not been categorized as a wilful defaulter.
(x) We have not been declared a fugitive economic offender.
4. We have not been declared as not ‘fit and proper person’ by an order of the Board.
5. No notice to show cause has been issued for proceedings under SEBI(Intermediaries)
Regulations, 2008 or under section 11(4) or section 11B of the SEBI Act during last one year
against us.
6. It is hereby declared that we and each of our promoters, directors, principal officer, compliance
officer and key managerial persons are not associated with vanishing companies.
7. We hereby undertake that there will not be any change in the Board of Directors of incumbent,
till the time prior approval is granted.
8. We hereby undertake that pursuant to grant of prior approval by SEBI, the incumbent shall
inform all the existing investors/ clients about the proposed change prior to effecting the same,
in order to enable them to take informed decision regarding their continuance or otherwise
with the new management.
The said information is true to our knowledge.
(stamped and signed by the Authorised Signatories)
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ANNEXURE F
PRINCIPLES FOR OUTSOURCING FOR INTERMEDIARIES
1. An intermediary seeking to outsource activities shall have in place a
comprehensive policy to guide the assessment of whether and how those
activities can be appropriately outsourced. The Board / partners (as the case may
be) {hereinafter referred to as the “the Board”} of the intermediary shall have the
responsibility for the outsourcing policy and related overall responsibility for
activities undertaken under that policy.
1.1. The policy shall cover activities or the nature of activities that can be outsourced,
the authorities who can approve outsourcing of such activities, and the selection
of third party to whom it can be outsourced. For example, an activity shall not be
outsourced if it would impair the supervisory authority’s right to assess, or its
ability to supervise the business of the intermediary. The policy shall be based
on an evaluation of risk concentrations, limits on the acceptable overall level of
outsourced activities, risks arising from outsourcing multiple activities to the same
entity, etc.
1.2. The Board shall mandate a regular review of outsourcing policy for such activities
in the wake of changing business environment. It shall also have overall
responsibility for ensuring that all ongoing outsourcing decisions taken by the
intermediary and the activities undertaken by the third-party, are in keeping with
its outsourcing policy.
2. The intermediary shall establish a comprehensive outsourcing risk management
programme to address the outsourced activities and the relationship with the
third party.
2.1. An intermediary shall make an assessment of outsourcing risk which depends on
several factors, including the scope and materiality of the outsourced activity, etc.
The factors that could help in considering materiality in a risk management
programme include-
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2.1.1. The impact of failure of a third party to adequately perform the activity on
the financial, reputational and operational performance of the
intermediary and on the investors / clients;
2.1.2. Ability of the intermediary to cope up with the work, in case of non
performance or failure by a third party by having suitable back-up
arrangements;
2.1.3. Regulatory status of the third party, including its fitness and probity status;
2.1.4. Situations involving conflict of interest between the intermediary and the
third party and the measures put in place by the intermediary to address
such potential conflicts, etc.
2.2. While there shall not be any prohibition on a group entity / associate of the
intermediary to act as the third party, systems shall be put in place to have an
arm’s length distance between the intermediary and the third party in terms of
infrastructure, manpower, decision-making, record keeping, etc. for avoidance of
potential conflict of interests. Necessary disclosures in this regard shall be made
as part of the contractual agreement. It shall be kept in mind that the risk
management practices expected to be adopted by an intermediary while
outsourcing to a related party or an associate would be identical to those followed
while outsourcing to an unrelated party.
2.3. The records relating to all activities outsourced shall be preserved centrally so
that the same is readily accessible for review by the Board of the intermediary
and / or its senior management, as and when needed. Such records shall be
regularly updated and may also form part of the corporate governance review by
the management of the intermediary.
2.4. Regular reviews by internal or external auditors of the outsourcing policies, risk
management system and requirements of the regulator shall be mandated by the
Board wherever felt necessary. The intermediary shall review the financial and
operational capabilities of the third party in order to assess its ability to continue
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to meet its outsourcing obligations.
3. The intermediary shall ensure that outsourcing arrangements neither diminish
its ability to fulfill its obligations to customers and regulators, nor impede
effective supervision by the regulators.
3.1. The intermediary shall be fully liable and accountable for the activities that are
being outsourced to the same extent as if the service were provided in-house.
3.2. Outsourcing arrangements shall not affect the rights of an investor or client
against the intermediary in any manner. The intermediary shall be liable to the
investors for the loss incurred by them due to the failure of the third party and
also be responsible for redressal of the grievances received from investors
arising out of activities rendered by the third party.
3.3. The facilities / premises / data that are involved in carrying out the outsourced
activity by the service provider shall be deemed to be those of the registered
intermediary. The intermediary itself and Regulator or the persons authorized by
it shall have the right to access the same at any point of time.
3.4. Outsourcing arrangements shall not impair the ability of SEBI/SRO or auditors to
exercise its regulatory responsibilities such as supervision/inspection of the
intermediary.
4. The intermediary shall conduct appropriate due diligence in selecting the third
party and in monitoring of its performance.
4.1. It is important that the intermediary exercises due care, skill, and diligence in the
selection of the third party to ensure that the third party has the ability and
capacity to undertake the provision of the service effectively.
4.2. The due diligence undertaken by an intermediary shall include assessment of:
4.2.1. third party’s resources and capabilities, including financial soundness, to
perform the outsourcing work within the timelines fixed;
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4.2.2. compatibility of the practices and systems of the third party with the
intermediary’s requirements and objectives;
4.2.3. market feedback of the prospective third party’s business reputation and
track record of their services rendered in the past;
4.2.4. level of concentration of the outsourced arrangements with a single third
party; and
4.2.5. the environment of the foreign country where the third party is located.
5. Outsourcing relationships shall be governed by written contracts / agreements /
terms and conditions (as deemed appropriate) {hereinafter referred to as
“contract”} that clearly describe all material aspects of the outsourcing
arrangement, including the rights, responsibilities and expectations of the
parties to the contract, client confidentiality issues, termination procedures, etc.
5.1. Outsourcing arrangements shall be governed by a clearly defined and legally
binding written contract between the intermediary and each of the third parties,
the nature and detail of which shall be appropriate to the materiality of the
outsourced activity in relation to the ongoing business of the intermediary.
5.2. Care shall be taken to ensure that the outsourcing contract:
5.2.1. clearly defines what activities are going to be outsourced, including
appropriate service and performance levels;
5.2.2. provides for mutual rights, obligations and responsibilities of the
intermediary and the third party, including indemnity by the parties;
5.2.3. provides for the liability of the third party to the intermediary for
unsatisfactory performance/other breach of the contract
5.2.4. provides for the continuous monitoring and assessment by the
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intermediary of the third party so that any necessary corrective
measures can be taken up immediately, i.e., the contract shall enable
the intermediary to retain an appropriate level of control over the
outsourcing and the right to intervene with appropriate measures to meet
legal and regulatory obligations;
5.2.5. includes, where necessary, conditions of sub-contracting by the third-
party, i.e. the contract shall enable intermediary to maintain a similar
control over the risks when a third party outsources to further third
parties as in the original direct outsourcing;
5.2.6. has unambiguous confidentiality clauses to ensure protection of
proprietary and customer data during the tenure of the contract and also
after the expiry of the contract;
5.2.7. specifies the responsibilities of the third party with respect to the IT
security and contingency plans, insurance cover, business continuity
and disaster recovery plans, force majeure clause, etc.;
5.2.8. provides for preservation of the documents and data by third party;
5.2.9. provides for the mechanisms to resolve disputes arising from
implementation of the outsourcing contract;
5.2.10. provides for termination of the contract, termination rights, transfer of
information and exit strategies;
5.2.11. addresses additional issues arising from country risks and potential
obstacles in exercising oversight and management of the arrangements
when intermediary outsources its activities to foreign third party. For
example, the contract shall include choice-of-law provisions and
agreement covenants and jurisdictional covenants that provide for
adjudication of disputes between the parties under the laws of a specific
jurisdiction;
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5.2.12. neither prevents nor impedes the intermediary from meeting its
respective regulatory obligations, nor the regulator from exercising its
regulatory powers; and
5.2.13. provides for the intermediary and /or the regulator or the persons
authorized by it to have the ability to inspect, access all books, records
and information relevant to the outsourced activity with the third party.
6. The intermediary and its third parties shall establish and maintain contingency
plans, including a plan for disaster recovery and periodic testing of backup
facilities.
6.1. Specific contingency plans shall be separately developed for each outsourcing
arrangement, as is done in individual business lines.
6.2. An intermediary shall take appropriate steps to assess and address the potential
consequence of a business disruption or other problems at the third party level.
Notably, it shall consider contingency plans at the third party; co-ordination of
contingency plans at both the intermediary and the third party; and contingency
plans of the intermediary in the event of non-performance by the third party.
6.3. To ensure business continuity, robust information technology security is a
necessity. A breakdown in the IT capacity may impair the ability of the
intermediary to fulfill its obligations to other market participants/clients/regulators
and could undermine the privacy interests of its customers, harm the
intermediary’s reputation, and may ultimately impact on its overall operational risk
profile. Intermediaries shall, therefore, seek to ensure that third party maintains
appropriate IT security and robust disaster recovery capabilities.
6.4. Periodic tests of the critical security procedures and systems and review of the
backup facilities shall be undertaken by the intermediary to confirm the adequacy
of the third party’s systems.
7. The intermediary shall take appropriate steps to require that third parties protect
confidential information of both the intermediary and its customers from
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intentional or inadvertent disclosure to unauthorised persons.
7.1. An intermediary that engages in outsourcing is expected to take appropriate
steps to protect its proprietary and confidential customer information and ensure
that it is not misused or misappropriated.
7.2. The intermediary shall prevail upon the third party to ensure that the employees
of the third party have limited access to the data handled and only on a “need to
know” basis and the third party shall have adequate checks and balances to
ensure the same.
7.3. In cases where the third party is providing similar services to multiple entities, the
intermediary shall ensure that adequate care is taken by the third party to build
safeguards for data security and confidentiality.
8. Potential risks posed where the outsourced activities of multiple intermediaries
are concentrated with a limited number of third parties.
In instances, where the third party acts as an outsourcing agent for multiple
intermediaries, it is the duty of the third party and the intermediary to ensure that strong
safeguards are put in place so that there is no co-mingling of information /documents,
records and assets.
IX. APPENDIX: LIST OF CIRCULARS / NOTIFICATIONS/
COMMUNICATIONS
Sr. Circular/ Notification/ Date Subject
No. Communication No.
1 Cir/ ISD/1/2011 23-Mar-11 Unauthenticated news circulated by
SEBI Registered Market Intermediaries
through various modes of
communication
2 CIR/ISD/2/2011 24-Mar-11 Addendum to Circular no.
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Sr. Circular/ Notification/ Date Subject
No. Communication No.
Cir/ISD/1/2011 dated March 23, 2011
3 CIR/MIRSD/24/2011 15-Dec-11 Guidelines on Outsourcing of Activities
by Intermediaries
4 CIR/MIRSD/3/2014 28-Aug-14 Information regarding Grievance
Redressal Mechanism
5 CIR/MIRSD/5/2013 27-Aug-13 General Guidelines for dealing with
Conflicts of Interest of Intermediaries
and their Associated Persons in
Securities Market
6 CIR/MIRSD/2/2015 26-Aug-15 Implementation of the Multilateral
Competent Authority Agreement and
Foreign Account Tax Compliance Act
7 CIR/MIRSD/3/2015 10-Sep-15 Reporting requirement under Foreign
Account Tax Compliance Act (FATCA)
and Common Reporting Standards
(CRS)-Guidance Note
8 SEBI/HO/MRD/DSA/CIR/P 19-Oct-16 Facilitating transaction in Mutual Fund
/2016/113 schemes through the Stock Exchange
Infrastructure
9 SEBI/HO/IMD/DF1/CIR/P/ 27-Dec-19 Measures to strengthen the conduct of
2019/169 Investment Advisers (IA)
10 SEBI/HO/IMD/DF1/CIR/P/ 09-Jan-20 Operating Guidelines for Investment
2020/04 Advisers in International Financial
Services Centre
11 SEBI/HO/IMD/DF1/CIR/P/ 28-Feb-20 Operating Guidelines for Investment
2020/31 Advisers in International Financial
Services Centre (IFSC) – Clarifications
12 SEBI/HO/IMD/DF1/CIR/P/ 06-Aug-20 Administration and Supervision of
2020/148 Investment Advisers
13 SEBI/HO/IMD/DF1/CIR/P/ 23-Sep-20 Guidelines for Investment Advisers
2020/182
14 SEBI/HO/IMD/DF1/CIR/P/ 28-Sep-20 Operating Guidelines for Investment
2020/185 Advisers in International Financial
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Sr. Circular/ Notification/ Date Subject
No. Communication No.
Services Centre (IFSC) – Amendments
15 SEBI/HO/MIRSD2/DOR/CI 03-Nov-20 Advisory for Financial Sector
R/P/2020/221 Organizations regarding Software as a
Service (SaaS) based solutions
16 SEBI/HO/IMD-1/DOF- 31-Aug-21 Extension of time for seeking
1/P/CIR/2021/622 membership of BSE Administration &
Supervision Limited
17 SEBI/HO/IMD/IMD- 18-Jun-21 Framework for administration and
I/DOF1/P/CIR/2021/579 supervision of Investment Advisers
under the SEBI (Investment Advisers)
Regulations, 2013
18 SEBI/HO/IMD/IMD- 30-Sep-21 Guidelines for Investment Advisers’ -
I/DOF1/P/CIR/2021/632 Extension of timelines
19 SEBI/HO/IMD/IMD-II 13-Dec-21 Publishing Investor Charter and
CIS/P/CIR/2021/0686 disclosure of Investor Complaints by
Investment Advisers on their
websites/mobile applications
20 SEBI/HO/IMD/IMD-I 21-Dec-21 Investment Advisory Services for
DOF1/P/CIR/2021/694 Accredited Investors
21 SEBI/HO/MIRSD/ MIRSD- 28-Nov-22 Procedure for seeking prior approval for
PoD-2/P/CIR/2022/163 change in control
22 SEBI/HO/DEPA-III/DEPA- 25-Feb-22 Approach to securities market data
III_SSU/P/CIR/2022/25 access and terms of usage of data
provided by data sources in Indian
securities market
23 SEBI/HO/MIRSD/ MIRSD- 05-Apr-23 Advertisement code for Investment
PoD-2/P/CIR/2023/51 Advisers (IA) and Research Analysts
(RA)
24 SEBI/HO/MIRSD/ MIRSD- 06-Apr-23 Usage of brand name/trade name by
PoD-2/P/CIR/2023/52 Investment Advisers (IA) and
Research Analysts (RA)
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