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NISM Series X-B study materials
NISM Series X-B study resources

NISM Series X-B: Regulatory, Ethical and Compliance Requirements for Investment Advisers

NISM Series X-B · Work through your exam, one topic at a time.

All guide sections

Regulatory, Ethical and Compliance Requirements for Investment Advisers

This domain tests the SEBI (Investment Advisers) Regulations, 2013, the Code of Conduct and the compliance mechanics that keep an advisory practice lawful. Questions mix eligibility rules with ethical scenarios.

Registration and eligibility

  • Registration with SEBI is mandatory to act as an investment adviser; it is valid for five years and must be renewed.
  • Certification requirements include the NISM Series X-A and X-B examinations for the adviser and relevant personnel, along with prescribed qualification and experience.
  • Net-worth thresholds apply (₹2.5 lakh for an individual or partnership firm, ₹50 lakh for a body corporate or LLP, subject to amendment). Non-individual advisers need a compliance officer, and audit obligations apply above prescribed client numbers.

Conduct and compliance

  • Fiduciary duty: client interest comes first; disclose or avoid conflicts; never assure returns or misrepresent performance.
  • Risk profiling and suitability must precede advice; use a written client agreement; disclose fees, which must stay within the regulatory ceiling.
  • Segregate advisory from distribution and obtain client consent before execution; retain records for five years; follow KYC and PMLA obligations; route grievances through SCORES and the online dispute resolution mechanism.

Worked example

An adviser whose relative manages relationships at a fund house recommends that AMC's scheme to every client without comparing alternatives. Even if the product happens to suit each client, the undisclosed conflict breaches the Code of Conduct. The fix is disclosure plus a documented, product-agnostic selection process; a fee arrangement that rewards the recommendation itself would compound the breach.

Traps that cost marks

Assuming registration permits distribution; presenting past performance as a promise; missing the five-year renewal; keeping records for less than five years; charging above the fee ceiling; ignoring the segregation of advisory and distribution revenue.