- An analysis of 78 SEBI orders from January 2013 to June 14, 2023, reveals that 74 were against unregistered entities, and 22 targeted registered ones
- The study suggests that RIAs who are not ‘trading call providers’ should be treated differently, as their activities have not led to investor complaints, indicating the need for tailored regulatory approaches
NE BUSINESS BUREAU
MUMBAI, OCT 3
An analysis conducted by the Association of Registered Investment Advisers (Aria) on the enforcement orders issued by the Securities and Exchange Board of India (Sebi) in the capital market reveals a significant trend.
ARIA commissioned Sanjay Kadel & Co. Chartered Accountants to provide an analysis of all enforcement orders passed by SEBI against Investment advisory firms since inception till June.
An analysis of 78 SEBI orders from January 2013 to June 14, 2023, reveals that 74 were against unregistered entities, and 22 targeted registered ones.
As many as 95 per cent of Securities and Exchange Board of India’s enforcement orders are directed towards investment advisers who are primarily involved in providing trading calls and speculative trading tips, according to a recent study examining the actions taken by the SEBI against registered investment advisers. The study, conducted by the Association of Registered Investment Advisers (ARIA), further found that, in contrast, only 5 per cent of these orders relate to advisers who offer comprehensive financial advice, media reports have said.
The term ‘trading call provider’ is not officially defined by SEBI, so ARIA provided a simplified definition, categorising them as those who offer advice on non-delivery trades, equity intraday, derivatives, and leveraged trading, essentially focusing on speculative trading rather than long-term financial planning.
The study also highlights regional trends, with 51 per cent of the violators hailing from Madhya Pradesh, particularly the city of Indore, which has gained notoriety as a hub for stock tippers and speculative traders. Beyond Indore, cities like Bengaluru, Madurai, Surat, Ahmedabad, and Mumbai have also seen instances of such non-compliance.
Regarding complaints against registered investment advisers (RIAs), SEBI’s complaint mechanism, SCORES, reveals that 78 per cent of the 918 RIAs have not faced any investor complaints. However, 9 per cent of RIAs have accumulated 10 or more complaints, accounting for a substantial 94 per cent of the total complaints. Notably, these RIAs appear to be primarily ‘trading call providers’.
Out of the 22 SEBI orders against RIAs, only one was related to mutual funds, while the majority were linked to equity and derivative recommendations that went awry for their clients. The study suggests that RIAs who are not ‘trading call providers’ should be treated differently, as their activities have not led to investor complaints, indicating the need for tailored regulatory approaches.
| Sr No | Description | Number of RIAs | Percentage of the total RIAs against whom complaints are
received |
Total Number of Complaints | Percentage of Complaints |
| 1 | Complaints in double digits | 80 | 9% | 4,999 | 94% |
| 2 | Complaints lower than
double digits against RIAs |
120 | 13% | 331 | 6% |
| 3 | Nil Complaints received
against these RIAs |
718 | 78% | 0 | 0% |
| Total | 918 | 100% | 5,330 | 100% |
