Q.25: In case of a non-individual Investment Adviser (private limited company) is it the trades in the company account or personal trading by persons associated with investment advice that is relevant for disclosure.

Response:

The disclosure related points relevant to your query i.e. trades in company account or personal trading by PAIA are provided below under 4 categories:

Category-1: Mandate regarding ‘Transactions on own account’

According to Regulation 15 of the IA Regulations

The following general obligations and responsibilities are mandated:

Regulation 15(7): An investment advisor shall not enter into transactions on its own account which is contrary to its advice given to clients for a period of fifteen days from the day of such advice.

Provided that during the period of such fifteen days, if the investment adviser is of the opinion that the situation has changed, then it may enter into such a transaction on its own account after giving such revised assessment to the client at least 24 hours in advance of entering into such transaction.

Regulation15(10): An investment adviser shall not act on its own account, knowingly to sell securities or investment products to or purchase securities or investment products from a client.

Category-2: General mandates regarding disclosures

According to Sec. 15(1): An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise.

According to Sec. 15(5): An investment adviser shall ensure that in case of any conflict of interest of the investment advisory activities with other activities, such conflict of interest shall be disclosed to the client.

According to Third Schedule of IA Regulations and Sec. 15(9) of the IA Regulations

The following extract from Code of conduct is prescribed for the IA — relevant to the disclosures

• An IA shall make adequate disclosures of relevant material information while dealing with clients.
• An IA shall try to avoid conflicts of interest as far as possible and when they cannot be avoided, it shall ensure that appropriate disclosures are made to its clients and that the clients are fairly treated.

Category-3: Specific mandate regarding disclosures before engagement

According to Regulation 18, An IA shall disclose to a prospective client:

• all material information about itself and

• such other information as is necessary to take an informed decision on whether or not to avail its services.

Category-4: Specific mandate regarding disclosures during the engagement

• According to Regulation 18, An investment adviser shall disclose to the client:
• its holding or position, if any, in the financial products or securities which are subject matter of advice

• any actual or potential conflicts of interest arising from any connection to or association with any issuer of products/ securities

• any material information or facts that might compromise its objectivity or independence in the carrying on of investment advisory services

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