In-principle registration

An Investment Adviser can start out registered simply as an individual. Growth can force a change. Past a certain size, SEBI's rules make that change mandatory.

Once an individual adviser grows past a set size, they must apply for in-principle registration. This is registration as a non-individual adviser instead — a company or a partnership.

Think of it as a bridge. It carries the adviser from an individual practice to a corporate one. It does not last forever. It is meant only to cover the changeover period.

The trigger is crossing either of two thresholds, whichever comes first: 300 clients at any point in time, or Rs 3 crore of fees collected during the financial year. Once either is crossed, the individual adviser must apply for in-principle registration as a non-individual investment adviser.

That in-principle registration is valid for three months, meant to assist the transition. On completing that transition period, or on being granted the actual certificate of registration as a non-individual adviser, whichever happens first, the adviser must surrender their original individual registration. A related cap exists for part-time advisers, whose client count may never exceed 75 in total.

An individual Investment Adviser's practice grows to 310 clients during the year, past the 300-client trigger, even though her total fees are still well under Rs 3 crore. She must now apply for in-principle registration as a non-individual adviser.

That in-principle registration gives her three months to complete the switch — setting up a company or LLP structure and obtaining the full non-individual certificate of registration. The moment that new certificate is granted, or the three months run out, whichever is earlier, she must surrender her original individual adviser registration; she cannot continue to hold both.

Chapter 18 (Key Regulations), section 18.6 (in the discussion following registration requirements), sets out the 300-client/Rs 3 crore trigger, the three-month validity of in-principle registration, and the 75-client cap for part-time advisers. Expect a question testing the exact trigger figures, or the three-month validity period.

• Either threshold triggers the requirement — 300 clients or Rs 3 crore of fees — not both together; crossing just one is enough.
• In-principle registration is valid for exactly three months, not indefinitely, and not until the adviser gets around to converting.
• A part-time investment adviser's client count is capped at 75 — a separate rule from the 300-client trigger for full-time individual advisers, and easy to confuse with it.