SEBI: Measures to strengthen the conduct of Investment Advisors

The Securities and Exchange Board of India (SEBI) Vide a circular dated 27th December, 2019 issued the measures to strengthen the conduct of Investment Advisors (IA) as per the SEBI (Investment Advisors) Regulations 2013. These new measures are effective from 01-01-2020. To strengthen the conduct of IAs and protect interest of investors, SEBI made the following measures that the IAs should comply with –

  1. As per the SEBI (Investment Advisors) Regulations 2013, investment advice can be given after completing risk profile of the client and ensuring suitability of product. It came to SEBI notice that IAs providing free advice on trial basis without considering risk profile. So, SEBI rules that the IAs should not provide free trial for any products/services to prospective clients.
  2. Registered IAs should provide investment advice only after completing the risk profile of the client based on information provided by the client and after obtaining consent of the client on completed risk profile either through registered email or physical document.
  3. IAs should accept advisory fees strictly by account payee crossed cheques / demand draft or by way of direct credit into their bank account through NEFT/ RTGS/IMPS/UPI. IAs shall not accept cash deposits.
  4. IAs will display the information such as number of complaints at the beginning of the month, received during the month, etc., on the homepage (without scrolling) of their website/mobile app. The information should be displayed properly using font size of 12 or above and made available on monthly basis within 7 days of end of the previous month.

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