Govt to leash investment tips business

NEW DELHI: The government is working towards putting in place a framework for investment advisors rendering tips to general public about investments. The paper outlining the framework on investment advice would soon be placed in public domain, a senior finance ministry official said on Thursday.

“We will bring out an approach paper by month-end on convergence of regulations to regulate investment advisors engaged in selling financial products and advising investors,” K P Krishnan, joint secretary (capital markets), and a member on Sebi board, said on the Financial Planning Congress.

Mr Krishnan said efforts would be made to ‘converge regulations’ and not regulators governing these financial intermediaries. He said he was not in favour of formulating an additional legislation as it would add to complexities. “We are making efforts to minimise the complexities, and a new legislation would only add to further complexity,” he said. The government is in favour of transition from rule-based to principles-based regulations.

Investment advisors sell products that fall under the jurisdiction of regulators like Sebi, Insurance Regulatory and Development Authority (insurance schemes), the Reserve Bank of India (NBFC deposits, mortgages) and Forward Markets Commission (commodities).

The framework, currently under examination, may look at making certain level of qualification mandatory for rendering investment advise. The regulation could be on the lines of the US Securities and Exchange Commission framework, which makes it mandatory for investment advisers to register with it. The government has taken a cue from the Financial Education Act, 2003, of the US.

Further, it is in talks with the Central Statistical Organisation for undertaking a survey on investment behaviour in the country. Underscoring the need to generate accurate data for policy-making, the government is planning a survey every five years to study the savings and investment patterns in the country, Mr Krishnan said.

With a view to spread financial literacy in the country, the ministry of finance is talking to education department to make financial awareness a part of curriculum. Module for vocational training efforts are on to bring financial awareness programmes like opening up of banks account, operating credit card in the main stream education, he said.