The Hindu : Business : SEBI moots self-regulator for financial advisors

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Friday, Aug 17, 2007
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SEBI moots self-regulator for financial advisors

Special Correspondent

HYDERABAD: The Securities and Exchange Board of India (SEBI) on Thursday mooted the idea of having a self regulatory organisation (SRO) for financial advisors like broking houses, financial advisory firms and print and electronic media.

Talking to presspersons here, SEBI Chairman M. Damodaran said the need for having a regulator for advisors was felt for a long time. He, however, said SEBI was not going to set up the regulatory organisation. But an SRO with representatives from all categories of advisors would have to evolve on their own by drafting their own code of conduct to offer professional advice with a sense of responsibility.

Mr. Damodaran said SEBI had written to other regulators like the Reserve Bank of India and the Insurance Regulatory and Development Authority, seeking to know whether they would like to associate themselves with the SRO as and when it was set up.

To a query on whether the regulator’s decisions would be binding on the advisors, the SEBI chief said, “We believe the kind of people we are going to regulate are highly educated and responsible.”

On hedge funds, he said there was no need for a separate category for their registration, as “we have registration requirement for foreign institutional investors (FIIs). If they can comply with them, it is enough.” In fact, the hedge funds brought liquidity to equity, so they should not be viewed as destabilising agents.

“We do not have to be unduly worried about the sub-prime problem, which is specific to housing loans in the U.S.,” he asserted.

Demutualisation

On demutualisation (regulation of mutual funds), the SEBI Chairman said the asset management companies were licensed and registered and “we are working on regulating of distributors who are not being regulated so far.”

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