Market Intermediaries and Regulatory Registration
What is tested
This domain covers who must register with SEBI, what each intermediary may do, and the conduct, capital and reporting obligations that continue after registration. It is about regulatory perimeter, not product knowledge.
Core rules
- SEBI registers stock brokers, merchant bankers, underwriters, portfolio managers, registrars and share transfer agents, debenture trustees, credit rating agencies, custodians, depository participants, investment advisers, research analysts, mutual funds, AIFs and FPIs under specific regulations.
- Registration is activity-specific. A merchant banker cannot manage discretionary portfolios merely because it advises on issues; a portfolio manager cannot act as an investment adviser without the separate advisory registration.
- Applicants must satisfy fit and proper criteria, capital adequacy/net-worth, qualification and experience, and infrastructure. Registration is not freely transferable; change in control needs prior approval.
- Intermediaries must follow a code of conduct, keep records, make disclosures, segregate client assets, avoid conflicts, and submit periodic reports. SEBI can inspect, seek information, issue directions and take enforcement action.
Worked example
A firm wants to (i) advise 300 retail clients on mutual fund selection for a fee and (ii) manage a discretionary ₹5 crore portfolio for a client. The first activity is investment advice and needs registration as an investment adviser; the second is portfolio management and needs registration as a portfolio manager. The firm cannot rely on a stock-broking licence, because broking only executes trades. If it later sells control to a new owner, it must seek SEBI’s prior approval.
Traps
Do not assume one SEBI registration covers all activities. Do not confuse registration with exchange membership. Do not treat “fit and proper” as a one-time test - it is continuing. Do not ignore the distinction between an intermediary and its clients’ assets.