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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Key Regulations

Mr. Kapoor, an individual investment adviser, wants to offer both advisory services and also distribution of mutual fund products to the same client. Under the SEBI (Investment Advisers) Regulations, what is the position?

An investment adviser cannot provide distribution services to its advisory clients, because the regulations require segregation of advisory and distribution activities at the client level. Disclosure, consent or a low commission does not cure the conflict, so the client-level separation must be kept.

  1. AHe may do both for the same client provided he discloses the commission to the client
  2. BHe may do both if the client gives written consent
  3. CHe must not provide distribution services to advisory clients; the client-level segregation is mandatory, and an individual must keep these activities separateCorrect
  4. DHe may do both if the commission is below 1% of the advisory fee

Explanation

The regulations require segregation of advisory and distribution activities at the client level: an investment adviser cannot provide distribution services to advisory clients, and distribution-side entities of the adviser's family cannot sell to those clients. Disclosure or consent does not remove the prohibition, and no 1% exception exists.

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