The Securities and Exchange Board of India (SEBI) has announced its intention to take stricter action against unregistered investment advisors, aiming to curb the rise of unauthorized advisory services in the market.
Madhabi Puri Buch, Chairperson of SEBI, shared this information, highlighting the regulatory body’s efforts to address the issue.
While specific details regarding the new rules are yet to be disclosed, SEBI is determined to address the growing number of unregistered advisors who provide buy and sell recommendations to investors.
In recent years, there has been a significant surge in the number of investment advisors offering their services to investors.
However, SEBI guidelines explicitly state that only registered advisors are authorized to provide such investment advice to clients.
SEBI’s Recent Actions on Complaints:
Chairperson Buch revealed this information in response to a query from Moneycontrol during the inauguration ceremony of AMFI’s new office in Mumbai.
The market regulator recently issued a settlement order against fininfluencer PR Sundar, his company Mansun Consulting, and co-promoter M Sundar.
The order addressed the complaint that they had been offering investment advisory services without proper registration with SEBI.
Each of the three entities has paid a settlement amount of Rs. 15.60, and a combined disgorgement amount of Rs. 6.07 crore has also been remitted to SEBI.
SEBI’s Warning to Gunjan Verma:
SEBI also issued a warning to fininfluencer Gunjan Verma, highlighting that Verma was not registered and therefore should refrain from providing investment advice.
While no evidence of Verma giving investment advice was found, SEBI discovered that Verma had accepted money from some clients who later complained about promised returns on their investments.
SEBI’s Regulatory System:
Questions have arisen regarding SEBI’s system or committee responsible for monitoring investment advice.
Currently, numerous investment advisors operate without registering with SEBI, offering advisory services to clients for a fee and making promises of substantial returns.
When investors face losses, these unregistered advisors often disassociate themselves. Additionally, concerns have been raised about whether SEBI only takes action after receiving complaints.
The settlement case involving R Sundar highlights that SEBI received two complaints against Sundar for providing advisory services without obtaining the required investment advisory license.
During the investigation, SEBI found that Sundar operated a blog through which he offered advisory services under different packages. Verma’s case was similarly investigated following complaints.
Speaking anonymously, a registered investment advisor informed Moneycontrol that SEBI has strict regulations for investment advisors, and it is imperative for unregistered advisors to comply with SEBI rules when providing investment advice.
However, many unregistered advisors continue to operate without repercussions, with action being taken against only a select few upon receiving complaints.
