In exercise of the powers conferred

## Report on Securities and Exchange Board of India Investment Advisers Third Amendment Regulations, 2021 **1. Executive Summary:** This report analyzes the Securities and Exchange Board of India (SEBI) Investment Advisers Third Amendment Regulations, 2021, as published in the Gazette of India on August 3, 2021. This amendment modifies the Securities and Exchange Board of India Investment Advisers Regulations, 2013. The key changes include the insertion of definitions for "accreditation agency" and "accredited investor," referencing their meanings as defined in the SEBI Alternative Investment Funds Regulations, 2012, and the explicit inclusion of "accredited investors" in Regulation 15A regarding client interactions. These changes likely aim to broaden the scope of investors that investment advisors interact with, and align regulations with those governing Alternative Investment Funds. **2. Introduction:** This report provides an overview and analysis of the Securities and Exchange Board of India Investment Advisers Third Amendment Regulations, 2021 (hereinafter referred to as "the Amendment"). This analysis is based solely on the provided text of the notification published in the Gazette of India on August 3, 2021. The purpose of this report is to inform stakeholders about the specific changes introduced by this amendment. **3. Policy Overview:** This is an amendment to the Securities and Exchange Board of India Investment Advisers Regulations, 2013. The core objective of the Investment Advisers Regulations, as can be inferred from the fact that it's being amended to include more investor types, is to regulate and oversee individuals and entities providing investment advice to investors, potentially aiming to protect investors and maintain market integrity. **4. Background and Rationale:** The amendment appears to address the need to clarify the applicability of the Investment Advisers Regulations to "accredited investors." By explicitly defining "accreditation agency" and "accredited investor" by referencing the definitions used in the SEBI Alternative Investment Funds Regulations, 2012, the amendment likely aims to create consistency across regulations and potentially open up the investment advisory services to a broader range of clients who qualify as accredited investors. This alignment suggests a move towards a more comprehensive regulatory framework for investment advice concerning sophisticated investors. The inclusion of accredited investors in Regulation 15A implies an emphasis on responsible interaction with this class of investors. **5. Key Provisions / Changes:** This section details the changes introduced by the Securities and Exchange Board of India Investment Advisers Third Amendment Regulations, 2021. * **Amendment 1:** *Definition Insertion in Regulation 2(1)* * **Specific Part Changed:** Subregulation 1 of regulation 2 of the Securities and Exchange Board of India Investment Advisers Regulations, 2013. * **New Rule/Provision:** * Clause aa shall be numbered as clause ac. * The following clauses shall be inserted after clause a and before clause ac: * "aa" accreditation agency shall have the same meaning as assigned to it in clause aa of subregulation 1 of regulation 2 of the Securities and Exchange Board of India Alternative Investment Funds Regulations, 2012; * "ab" accredited investor shall have the same meaning as assigned to it under clause ab of subregulation 1 of regulation 2 of the Securities and Exchange Board of India Alternative Investment Funds Regulations, 2012; * **Difference/Effect of the Change:** This amendment inserts formal definitions of "accreditation agency" and "accredited investor" into the Investment Advisers Regulations, borrowing those definitions directly from the Alternative Investment Funds Regulations. This brings regulatory clarity by formally recognizing these entities/individuals within the scope of the Investment Advisers Regulations and aligning the definitions across different regulations. * **Amendment 2:** *Inclusion of Accredited Investors in Regulation 15A* * **Specific Part Changed:** Regulation 15A of the Securities and Exchange Board of India Investment Advisers Regulations, 2013. * **New Rule/Provision:** After the word "client" and before the word "in", the words "including an accredited investor" shall be inserted. * **Difference/Effect of the Change:** By explicitly including "accredited investors" within Regulation 15A, the amendment clarifies that investment advisors must treat accredited investors as clients under this regulation. This likely relates to the responsibilities of investment advisors and the provisions within Regulation 15A apply to accredited investors as well. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience and stakeholders are: * **Investment Advisors:** The regulations directly affect investment advisors registered with SEBI. * **Accredited Investors:** This group is explicitly addressed and will be impacted by the provisions of the amendment. * **Accreditation Agencies:** These are bodies recognized under the Alternative Investment Funds Regulations, and will indirectly be impacted through the changes investment advisors must implement. * **Securities and Exchange Board of India (SEBI):** As the regulatory body, SEBI is responsible for implementing and enforcing these regulations. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Securities and Exchange Board of India (SEBI) is the responsible agency. * **Timelines:** The regulations came into force on the date of their publication in the Official Gazette, which was August 3, 2021. * **Procedures:** Investment advisors must update their internal policies and procedures to ensure compliance with the amended regulations, particularly regarding their interactions with accredited investors. The change implies investment advisors need to treat 'accredited investors' as they do their regular clients, as now defined in the amended policy. **8. Expected Outcomes / Impact of Changes:** The intended outcomes of these changes are likely to: * **Increased Clarity:** Provide greater clarity regarding the regulatory framework applicable to investment advice provided to accredited investors. * **Regulatory Consistency:** Ensure consistency in the definition of key terms across different SEBI regulations (specifically Investment Advisers Regulations and Alternative Investment Funds Regulations). * **Expanded Scope of Investment Advisory Services:** Potentially expand the scope of investment advisory services to include a wider range of accredited investors. * **Enhanced Investor Protection:** By explicitly including accredited investors in Regulation 15A, the amendment may lead to better protection for this class of investors. * **Streamlined Compliance:** Facilitate easier compliance for investment advisors dealing with accredited investors by providing clear definitions and guidelines. **9. Conclusion:** The Securities and Exchange Board of India Investment Advisers Third Amendment Regulations, 2021, introduces targeted changes to the existing regulations, primarily focusing on clarifying the application of these regulations to accredited investors. By incorporating definitions from the Alternative Investment Funds Regulations and explicitly including accredited investors in specific provisions, the amendment promotes regulatory consistency, enhances investor protection, and potentially expands the scope of investment advisory services. This amendment underscores SEBI's commitment to refining the regulatory landscape for investment advisors and aligning regulations with the evolving needs of the market.

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