What I found most interesting was that their concerns about the profession are more or less the same as India’s — transparency, disclosures, standards, costs and commissions. In the context of Draft SEBI (Investment Advisers) Regulations, 2007, released by the Securities and Exchange Board of India (SEBI) last week, this similarity of issues and concerns shows just how globalalised the regulatory framework around the intermediation industry in India and abroad have become, four in particular.

Certification. Today, any uncleji down the road can print a card in any permutation and combination of two sets of three words — financial, investment, insurance; and planner, consultant, adviser — and go about advising clients on which financial product to buy. To sell, however, he needs certification. Once SEBI’s draft guidelines turn into regulation, this unhealthy practice with acute information asymmetry in favour of advisers, sometimes in tandem with industry, will end. While a certification is no guarantee of efficiency, it does raise the bar through minimum qualifications and tests, and increases competency.

SRO. The certification above will not be given to anyone unless s/he’s a member of an SRO, says the SEBI draft proposal. Any potential adviser and seller of financial products will have to apply to an SRO, which after processing the application will forward it to SEBI with its recommendations. Regulators across the world are grappling with problems of administrative costs, compliance determination and individual level tracking. As a result, globally, the SRO model is gaining strength. The problems in India are no different from those in the US — I found that when I met with FINRA (Financial Industry Regulatory Authority), the world’s youngest SRO (renamed in July 2007 through the consolidation of NASD and member regulation, enforcement and arbitration functions of the New York Stock Exchange) on K Street in Washington DC. The SRO model is a sort of regulatory outsourcing — the SRO keeps members in check; regulators keep the SROs in check; together they deliver.

... contd.