Part-time investment adviser
Also written Part-time IA · Part-time RIA
An individual or firm registered with SEBI to give investment advice for consideration while also carrying on another business activity or employment — capped at 75 clients in total.
In plain language
Until recently, giving investment advice for a fee in India meant doing it as your whole occupation. SEBI now allows a smaller version of the licence.
A part-time investment adviser is an individual or a firm that gives advice for consideration and is also engaged in another business activity or employment. A practising chartered accountant, for instance, or someone in a salaried job outside the securities business.
The definition of an investment adviser expressly includes such a person, so all the usual duties apply. He is a fiduciary, he must complete risk profiling, and he cannot take a commission from anyone but his client.
Two conditions mark him out. He may have no more than 75 clients at any point of time. And he must use the words part-time investment adviser in all his correspondence with clients, so nobody is misled about what he is.
The other business also has to be a genuinely unrelated one. It cannot involve handling client money, and it cannot involve advising on products for investment.
How it works
Chapter 18 gives three linked definitions and two conditions.
The definition (section 18.6.1, Definitions). A part-time investment adviser means an individual or a firm, who for consideration, is engaged in the business of providing investment advice and is also engaged in any other business activity or employment. The definition of investment adviser in the same section includes a part-time investment adviser, so he is an investment adviser for every other purpose of the regulations.
What counts as the other business. "Other business activity or employment" means such business activity or employment which is not related to securities and:
- it does not involve handling or managing of money or funds of client or person; or
- it is not related to providing advice or recommendation to any client or person in respect of any products or assets for investment purposes.
The two conditions of registration (section 18.6.5).
| Condition | Requirement |
|---|---|
| Naming | A part-time investment adviser registered under these regulations shall use the term "part-time investment adviser" in all their correspondences with their clients |
| Client cap | The number of clients of a part-time investment adviser shall not exceed seventy-five in total at any point of time |
Compare that with the thresholds for an ordinary individual investment adviser in the same regulation: once his clients exceed three hundred at any point of time, or the fee collected during the financial year exceeds three crore rupees, whichever is earlier, he must apply for in-principle registration as a non-individual investment adviser, valid for three months to assist the transition, and surrender the individual registration on completion.
So the regulation now has three tiers by size: part-time, capped at 75 clients; individual, up to 300 clients or Rs 3 crore of fees; and non-individual above that.
Nothing else is relaxed. A part-time investment adviser is still bound by the general obligations of section 18.6.7 — act in a fiduciary capacity, disclose all conflicts of interest, take no consideration from anyone other than the client for the products advised on, maintain an arms-length relationship between advisory and other activities, segregate advisory from other activities, keep client information confidential, and observe the fifteen day rule against dealing on own account contrary to advice given.
A worked example
Illustrative. CA Meenakshi runs a tax practice and registers as a part-time investment adviser.
| Question | Answer |
|---|---|
| Is a tax practice "other business activity"? | Yes — not related to securities, does not handle client funds, does not advise on products for investment |
| How many advisory clients may she take? | 75 in total, at any point of time |
| What must her engagement letter say? | It must use the term part-time investment adviser |
| May she also earn distribution commission on the funds she recommends? | No — no consideration from anyone other than the client |
She charges Rs 40,000 a year and signs up 60 clients, so her advisory fee income is Rs 24,00,000.
Now she wants 20 more clients. That would take her to 80, past the cap, and the cap is not annual — it is at any point of time. She has two lawful choices: stop at 75, or give up the part-time registration and register as a full investment adviser. As a full individual adviser her ceiling becomes 300 clients or Rs 3 crore of fees in a financial year, whichever comes first, after which she must move to a non-individual registration.
And the arrangement that would cost her the registration: if her "other business" were a mutual fund distribution agency, it would fail the definition twice over — it is related to securities, and it involves recommending products for investment purposes.
Why NISM asks about it
Chapter 18 (Key Regulations), section 18.6.1 (Definitions) for part-time investment adviser and other business activity or employment, and section 18.6.5 (Conditions of Certificate) for the naming requirement and the 75-client cap. Expect a numeric question — 75 for a part-time adviser against 300 clients or Rs 3 crore for an individual adviser — or a definitional one on what qualifies as other business activity.
Common exam traps
- 75 clients in total at any point of time, not 75 a year and not 75 per branch.
- Do not confuse the tiers. 75 is the part-time cap; 300 clients or Rs 3 crore of fees is the trigger for an individual adviser to move to non-individual registration.
- The term must appear in all correspondence with clients — "part-time investment adviser", not simply "investment adviser".
- A part-time investment adviser is an investment adviser. The definition includes him, so every general obligation and the fiduciary duty apply in full.
- The other activity must be unrelated to securities, must not handle client money, and must not involve advising on products for investment. A distribution business does not qualify.
- Part-time describes the adviser, not the standard of care. There is no lighter suitability or risk-profiling requirement.
Where this is taught
Free preparation for NISM Series X-ARelated terms
- Principal officerThe named individual at a non-individual intermediary who carries personal regulatory responsibility for the advisory business, and who must personally hold the prescribed qualification and NISM certification.
- Investment adviserAny person who, for consideration, is in the business of giving investment advice, including anyone holding out as one — but not an AMFI-registered distributor whose advice is incidental to distribution.
- Fee-only adviserAn investment adviser who earns income from fees paid by the client — not commissions from product providers — and typically does not execute the transactions advised.
- Fifteen-day ruleThe SEBI rule barring an adviser from trading on their own account against advice just given to a client, for fifteen days — unless the client is told at least 24 hours before the adviser trades.
- In-principle registrationThe three-month transitional registration an individual Investment Adviser must apply for on crossing 300 clients or Rs 3 crore of annual fees, while converting to a non-individual adviser.
- Registered Investment AdviserA SEBI-licensed professional who charges investors a fee for investment advice; since 2013 only an RIA may use the word "adviser" — distributors, brokers and insurance agents may not.