Unauthorised trading calls land investment advisors in Sebi's net

The analysis has considered 918 RIAs and 5,330 investor complaints

An analysis commissioned by the Association of Registered Investment Advisers (ARIA) has revealed that nearly 95 per cent of enforcement orders against investment advisors pertain to providing unauthorised trading calls.

The analysis of enforcement orders issued by the Securities and Exchange Board of India (Sebi) in the past decade indicates that of a total of 78 main orders, 74 were against trading call providers, while the rest related to operational issues. Among these 74 cases, 56 orders were issued against unregistered entities, and 18 against registered ones.

Trading call providers offer advice on equity derivatives such as futures and options, intraday equity trades, non-delivery trades, and leverage trading.

Investment advisors are required to be registered with the market regulator, based on specific eligibility conditions, and are restricted from providing trading calls.

“This analysis indicates that action needs to be taken against unregistered investment advisers, and RIAs that are not ‘trading call providers’ should be treated differently, as their activities have not resulted in any enforcement actions by the regulator,” stated ARIA.

The association also noted that such RIAs have not generated any complaints from investors, according to the analysis conducted on complaints received through the Sebi Complaints Redress System (SCORES).

Data from the SCORES portal revealed that approximately 80 RIAs accounted for nearly 5,000 investor complaints, indicating that 9 per cent of RIAs were responsible for nearly 94 per cent of the complaints. While 78 per cent of RIAs had not received a single complaint to date, 13 per cent had only received in single digits.

The analysis considered 918 RIAs and 5,330 investor complaints.

The market watchdog and exchanges have been proactive in issuing cautionary notices to investors regarding box traders or unregistered entities periodically.