SEBI (Investment Advisers) Regulations

SEBI issued the Investment Advisers (IA) Regulations in January 2013, creating for the first time a formal regulatory category for persons providing investment advice as a primary business activity in India. Before these regulations, investment advice was largely unregulated — anyone could set up a practice offering financial or portfolio advice without registration, qualification requirements, or supervision. The 2013 regulations changed this by requiring all persons and entities providing 'investment advice' for consideration to register as SEBI Registered Investment Advisers (RIAs).

The regulations imposed a fiduciary standard on RIAs — a legally significant distinction. A fiduciary is required to act in the client's best interest at all times, disclosing and managing conflicts of interest, rather than merely meeting a 'suitability' standard. This placed RIAs in a different regulatory category from mutual fund distributors, who operated under a suitability framework administered by AMFI and were compensated through distributor commissions from AMCs rather than client fees.

A critical provision of the IA Regulations (significantly tightened through 2020 amendments) was the segregation of advisory and distribution activities. An individual or entity registered as an RIA could not simultaneously act as a mutual fund distributor, receiving trail commissions from AMCs. This was intended to eliminate the inherent conflict between fee-based advisory (where the adviser had no financial interest in recommending a specific product) and commission-based distribution (where the incentive was to recommend products with higher commissions). Non-individual RIAs (firms or companies) could maintain both activities only through clearly separated business units, with no client sharing between the advisory and distribution arms.

Qualification requirements for RIA registration included at least a graduate degree with minimum five years' experience in financial services, or a post-graduate degree or professional qualification (CFPCM, CFA, etc.) with minimum two years' experience. Persons dealing with clients were required to hold NISM Series X-A (Investment Adviser Level 1) certification. Net worth requirements were Rs 5 lakh for individuals and Rs 50 lakh for non-individuals.

The 2020 amendments to the IA Regulations also changed the client-adviser relationship structure significantly: RIAs were required to enter into a formal written client agreement, conduct risk profiling, and document suitability assessments for every recommendation. Fee structures were regulated, with a cap on fee-based charging and a prohibition on upfront large advisory fees. These amendments were intended to professionalise the advisory sector and build investor confidence in paying explicit fees for financial advice — a concept that India's investor community was still in the early stages of embracing.