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SEBI has proposed a draft investor charter for Registered Investment Advisers (RIAs) to enhance consumer protection and promote financial inclusion and literacy. The proposed charter outlines the duties of RIAs toward both their clients and the regulator.
The charter requires RIAs to be honest and transparent with clients by disclosing comprehensive details about their services including fees, conflicts of interest, and maintaining confidentiality of client information.
Additionally, RIAs are expected to ensure regulatory compliance through actions such as conducting annual audits, performing client risk profiling and assessments, disclosing the status of complaints on their websites, employing only qualified and certified staff, communicating with clients exclusively through official contact numbers, maintaining proper records, and ensuring that all advertisements and marketing materials comply with regulations.
The charter also mandates RIAs to disclose information about the services offered, client onboarding processes, grievance redressal mechanisms, and the basic rights of investors such as the right to privacy, the right to timely grievance redressal, and protection from misleading advertisements.
Moreover, the proposed charter outlines investor responsibilities in the form of a list of do’s and don’ts.
The do’s include:
- Deal only with registered adviser
- Ask necessary questions before investing
- Evaluate the risk-return profile and liquidity of investments
The don’ts include:
- Avoid relying on unsolicited stock tips
- Do not provide funds to the investment adviser for investing on your behalf
- Do not fall for promises of exorbitant or guaranteed returns
The proposed circular is open for comments till May 2 on this link.
