NEW DELHI: The Securities and Exchange Board of India on Friday announced measures to strengthen the conduct of investment advisors (IA).
The market regulator restricts financial advisers to provide a free trial. Sebi said that investment advice can be given after completing risk profiling of the client and ensuring the suitability of the product.
“It has come to the notice that investment advisors are providing advice on free trial basis without considering the risk profile of the client. Hence 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/service,” Sebi said.
The market watchdog added that risk profiling of the client is essential to provide advice on a suitable product based on various criteria like income, age, securities market experience.
It also asked financial advisers to receive fees through banking channel only.
“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 bring transparency in dealing with the clients, IAs shall accept fees strictly by account payee crossed cheques or demand draft or by way of direct credit into their bank account,” Sebi said.
With an objective to bring more transparency and enable investors to take informed decision regarding availing of advisory services, Sebi told advisers to display the status of complaints on its website.
These measures will be effective from January 1, 2020.