Q. 4: I am an individual RIA. I wish to convert to a corporate RIA. I have been told that I can constitute a partnership with my wife and apply for a Firms RIA registration. SEBI takes Individuals & Partnership as one, hence I can save registration + BASL membership cost. Although net worth requirements will be like corporate RIA. I can also have an RIA practice & ARN as one partner may do RIA business & second can take MFD license.

Is this OK?

Or I should aim to make a company/LLP & apply for Corporate RIAship. I wish to keep both businesses with client segregation as ok by SEBI regulations.

Request your direction.

Response:

Clarity-1. Cost : You are right in saving cost by going for Partnership firm.

In SEBI and BASL the fee structure is same for Individual and Partnership Firms.

Clarity-2. Compliance requirements: You are also right in identifying compliances i.e. Partnership firm will be treated as ‘Non-Individual’ and hence the networth and other compliance requirements will be like corporate RIA.

According to Sec. 2(pa) “non-individual” means a body corporate including a LLP and a partnership firm.

Clarity-3. Client-segregation: Currently, as mentioned by you, you have an Individual RIA license – So, you cannot provide distribution services.

But, as you plan to convert into a Non-Individual license, you will have to comply with the Regulation 22(3) for client level segregation at group level for investment advisory and distribution services.

Your strategy is to bring in both RIA business and MFD business under same umbrella Firm, which you can proceed to do, but only caveat is that, there is no concept of each partner having different license, but as a Firm you will have take the licenses – of course having separately identifiable department or divisions.

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