To strengthen conduct, Sebi asks investment advisers to do risk profiling

The Securities and Exchange Board of India (Sebi) noted that investment advisers (IAs) are providing advice on a free trial basis without considering risk profile of the client.

To further strengthen the conduct of investment advisers, markets regulator Sebi on Friday asked them to do proper risk profiling of clients and obtain their consent on the same before providing any advice to such investors.

The regulator also restrained investment advisers from providing free trial for any product and service.

The measures, aimed at further strengthening the conduct of investment advisers while providing investment advice and to protect the interest of investors seeking their advice, will come into effect from January 1, 2020, the regulator said in a circular.

The Securities and Exchange Board of India (Sebi) noted that investment advisers (IAs) are providing advice on a free trial basis without considering risk profile of the client

"The IAs shall not provide free trial for any products/services to prospective clients. Further, IAs shall not accept part payments (where some part of the fee is paid in advance) for any product or service," it added.

The regulator said investment advisers will provide investment advice only after completing risk profile of the client based on information provided by them and need to obtain consent of the client on completed risk profile either through registered email or physical document.

To bring transparency in dealing with the clients, Sebi has asked investment advisers (IAs) to accept fees through banking channels only. It has clarified that IAs shall not accept cash deposits.

Sebi observed that investment advisers are receiving advisory fee in the form of cash deposit in their bank accounts or through payment gateways which does not provide proper audit trail of fees received from the clients.

To enable the investors to take informed decision regarding availing of advisory services, IAs have been asked to display information with regard to number of complaints received as well as resolved during the month on the homepage of their website.

Also, they need to display information pertaining to number of grievances pending and reasons for such pendency during the month.

The information should be displayed using a proper font size and should be made available on monthly basis within 7 days of the end of the previous month.



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