"SEBI's recent Master Circular for Investment Advisers, released on June 15, 2023, consolidates vital regulations. It emphasizes risk profiling, fee collection norms, transparency, and mandatory requirements to safeguard investors and regulate the securities market."

According to Securities and  Exchange  Board  of  India (Investment Advisers) Regulations, 2013, Regulation 2[1(m)] defines Investment Adviser as any person,  who for consideration, is engaged in the business  of  providing  investment  advice to  clients  or  other  persons  or  group  of persons  and  includes  any  person  who  holds  out  himself  as  an  investment  adviser,  by whatever name called.

On June 15, 2023, SEBI released a Master Circular for Investment Advisers. It indicates that this Circular is a collection of all current or applicable circulars published by SEBI related to IAs. This circular intends to protect investors’ rights in securities, stimulate securities development, and regulate securities.

 The circular includes the following measures to improve the behaviour of investment advisors:

  • Free Trial Restrictions-

According to the IA regulations, investment advice can be offered after risk profiling the customer and establishing the products appropriateness. Sebi has discovered that IAs offer advice on a trial basis without considering the clients risk profile. As a result, IAs are instructed to refrain from supplying prospective clients with free trials of any products or services. Furthermore, IAs shall not take part payments (when a portion of the amount is paid in advance) for any product/service.

  • Appropriate Risk Profiling and Client Agreement to Risk Profiling-

Risk profiling of the customer is required to give appropriate product advice based on several characteristics such as income, age, securities market experience, and so on. Registered investment advisers may only give investment advice after completing the following step:

  1. Complete the customer’s risk profile using the information given by the client.
  2. Obtain the client’s permission on the completed risk profile through a registered email or physical document.
  • Receiving Fees Exclusively Through the Banking Channel-

IAs must only receive fees in the form of account payee-crossed cheques/demand drafts or direct credit. It is stated that IAs are not permitted to take monetary deposits.

  • The Status of Complaints Is Displayed on The Website-

To increase openness and enable investors to make informed decisions about whether to use advisory services, IAs must present compliance data on the homepage/mobile app. The data should be shown adequately with a font size of 12 or higher and made available monthly (within 7 days of the previous month’s end).

 Mandatory Requirements for Investment Advisers:

  1. Complaint Data to be displayed by IAs on their website/ mobile application by 07th of the succeeding month
  2. Undertaking on compliance of the advisory for Financial Sector Organizations regarding Software as a Service (SaaS) based solutions to be submitted half yearly
  3. Conduct annual audit and submit a report and adverse findings, if any.

This circular has been issued to protect the interests of investors  in  securities  and  to  promote  the  development  of,  and  to  regulate  the  securities market.


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