NISM Series XXV-B cheat sheet

SEBI was created in 1988 as a non-statutory administrative body and acquired statutory status on enactment of the SEBI Act, 1992.

Core statutes behind the market framework: SEBI Act 1992, Securities Contracts (Regulation) Act 1956, Depositories Act 1996 and the Companies Act 2013.

SEBI's mandate under the SEBI Act is threefold: protecting investors, developing the securities market and regulating the securities market.

BSE, established in 1875, is Asia's oldest stock exchange; NSE introduced nationwide screen-based electronic trading in 1994.

Securities are held in dematerialised form with depositories registered with SEBI: NSDL (1996) and CDSL (1999).

SCRA 1956 makes options and derivatives trading lawful only on recognised stock exchanges and governs securities contracts.

Appeals against SEBI orders lie to the Securities Appellate Tribunal (SAT), with a further appeal to the Supreme Court.

SEBI registers and regulates intermediaries, including investment advisers, stock brokers, merchant bankers, mutual funds and depositories.

The SEBI (Investment Advisers) Regulations, 2013 were framed under the SEBI Act; giving investment advice for consideration without SEBI registration is not permitted.

Only a SEBI-registered investment adviser may give investment advice for consideration; registration is available in individual and non-individual (company, partnership, proprietorship) forms.

Every adviser must have a principal officer responsible for overall operations and compliance; an individual adviser is the principal officer of his own practice.

The adviser, the principal officer and all persons associated with investment advice must hold the NISM Series XXV certification and the prescribed qualification.

Persons associated with investment advice are salaried or remunerated individuals who advise on the adviser's behalf and are bound by the code of conduct.

The adviser is a fiduciary: advice must be suitable to the client's risk tolerance, objectives, horizon and financial position.

Each piece of advice must be documented with its rationale, backed by a documented risk profile that is reviewed periodically.

Advisory and distribution must be separated: an adviser cannot distribute the same or similar products, nor accept commissions from manufacturers or distributors.

Implementation (execution) of advice is an optional, separately disclosed service requiring the client's written consent and separate fees.

An adviser must disclose its own holdings and any conflict of interest in the products or securities recommended to the client.

The core activity of an adviser is advice; execution support or any other non-core service must be separately disclosed, separately consented to and separately charged.

An adviser must not distribute the same or similar products it advises on, and must not accept commission, trail, gift or any consideration from product manufacturers or distributors.

An adviser must never take custody of client funds or securities; execution is routed through SEBI-registered intermediaries.

A mutual fund distributor acts for the asset management company, earns commission, needs AMFI ARN registration and NISM Series V-A, and is not a fiduciary to the client.

No assurance, guarantee or advertisement of returns is permitted; communications must be fair, not misleading and must bring out the risk.

Referrals and other non-core activities must be disclosed and segregated from advisory records so that the independence of advice is not compromised.

No transaction may be executed for a client without written authorisation; consent obtained for advice does not by itself authorise execution.

Selling products to advisory clients for commission is a prohibited conflict; the adviser cannot act as a sales agent for the same client base.

PAN is the mandatory identity document for KYC; photograph, address proof, bank details and in-person verification complete the identity file.

KYC records are uploaded to a KYC Registration Agency, and the CKYC registry allows one reusable record across SEBI-registered intermediaries.

A documented risk profile covering tolerance, objective, horizon and financial position precedes any advice and is reviewed periodically.

The signed advisory agreement must state the scope of services, fees, conflict disclosures, termination terms and the grievance redressal mechanism.

The adviser must know the client's financial situation and experience, and keep records client-wise with clear client-level segregation.

Identity, and where applicable beneficial ownership, must be verified before onboarding; incomplete or doubtful KYC means the client is not onboarded.

Records of advice, rationale, KYC and agreements are retained for at least five years and produced to SEBI on demand.

KYC must be updated whenever there is a material change in the client's details or circumstances.

The code of conduct requires honesty and integrity, due care and diligence, independent and unbiased views, confidentiality, and disclosure of conflicts.

Conflicts of interest must be identified and disclosed in writing; where a conflict cannot be managed, the adviser must decline or terminate the engagement.

Front-running (trading ahead of client or firm orders) and misuse of client information are prohibited as fraudulent and unfair trade practices under the PFUTP Regulations, 2003.

Grievance path: the adviser's designated officer first; if unresolved within one month, the client escalates to SEBI's SCORES platform, then to SEBI Ombudsman / SMART ODR.

A complaint register must be maintained and grievance redressal details disclosed to clients and on the adviser's website.

Under the PMLA, 2002 framework, advisers perform client due diligence, designate a principal officer and report suspicious transactions to FIU-IND.

Investment advisers must preserve client and advice records for at least five years and permit inspection by SEBI.

A non-individual investment adviser with 150 or more clients must appoint a compliance officer.

The SEBI (Prohibition of Insider Trading) Regulations, 2015 bar dealing in or communicating unpublished price-sensitive information.