Want assured returns? Do not rely on your investment advisor, Sebi in its latest diktat | Mint

Capital markets regulator Securities and Exchange Board of India (Sebi) has released a set of most important terms and conditions which must become the part of the investment advisory agreement between investor and the investment advisor.

These important terms and conditions must include a term wherein the invesment advisor must not guarantee guarantee any returns, accuracy, or risk-free investments. 

Further, the regular has said that any assured/fixed returns schemes or any other schemes of similar nature are prohibited by law. Therefore, no scheme of this nature should be offered to the client by the invesment advisor (IA), stated the Sebi circular dated Feb 17, 2025

Here we list out some of these terms & conditions:

I. No assured returns: As mentioned above, IA can not offer any scheme that gives assured return or fixed returns to the client.

II. Fee for advisory: The Investment Adviser (IA) shall only accept payments towards its fees for Investment Advisory Services and is not permitted to accept funds or securities in its account on the client’s behalf.

III. Consent required: Thus, the client is advised not to permit IA to execute any trade on his/her/its behalf without explicit consent. The IA does not guarantee returns, accuracy, or risk-free investments.

IV. Subject to limits: The fee charged by IA to the client will be subject to the maximum of amount prescribed by SEBI/Investment Adviser Administration and Supervisory Body (IAASB) from time to time.

The current fee limit under Fixed Fee mode is ₹1,51,000/- per annum per family of client. Under Assets under Advice (AUA) mode, maximum fee limit is 2.5 per cent of AUA per annum per family of client.

V. Advance fee: The advisor may charge fees in advance if agreed by the client. Such advance shall not exceed the period stipulated by SEBI; presently it is maximum two quarters.

In case of premature termination of the IA services by the client or the IA, the client shall be entitled to seek refund of proportionate fees only for unexpired period.

VI. No cash payment: Fees to the invesment advisor can be paid by the client through any of the specified modes like cheque, online bank transfer, UPI, etc. However, cash payments are not allowed.

VII. Financial details: The advisor is meant to know the client’s financial details for providing services. Therefore, the client is required to share the financial information (such as income, existing investments, liabilities, etc.) with the IA.

VIII. Assess risk: The IA is required to carry out the client’s risk profiling and suitability analysis before providing services and thereafter on an ongoing basis. The services provided will be in line with the assessed risk profile. The investment advisor will also convey the assessed risk profile to his/her client.

IX Significance of registration: The SEBI registration, enlistment with IAASB, and NISM certification do not guarantee the performance of IA or assure returns to the client.

X. Grievance: For any grievances, client should first contact the IA using the details on its website or following contact details: IA to provide details as per ‘Grievance Redressal / Escalation Matrix’.