Madhabi Puri Buch, the Chairperson of the Securities and Exchange Board of India (SEBI), addressed the Association of Registered Investment Advisers (ARIA) conference, revealing a concerning statistic – 35% of investment advisers in India are unregistered.

Buch emphasized the need to not only increase the number of investment advisers but also ensure their registration with the market regulator to ensure compliance. She stressed that India should add at least 10 lakh (1 million) registered investment advisers, underlining the importance of distinguishing between legitimate and illegitimate advisers.

Furthermore, Buch stressed that registered advisers should focus solely on providing investment advice, avoiding trading calls. She expressed concerns about unregistered advisers running large operations with non-registered individuals, increasing the risk of disseminating poor advice to investors. She cited instances where a single registered investment adviser managed a 500-person call center, highlighting the potential harm caused by such practices.

Buch also acknowledged SEBI’s awareness of illegitimate practices among investment advisers, such as running parallel Portfolio Management Services (PMS) or renting registration certificates. These illicit practices have been prevalent in the industry.

A recent study of SEBI’s actions against investment advisers revealed that a significant portion of advisers provided equity derivative and speculative trading calls and tips. Notably, 51% of the actions were taken against entities from Indore, known for spamming equity phone calls.

SEBI’s goal of adding 10 lakh registered investment advisers is significant, given India’s increasing rate of adding nearly two million trading accounts each month.

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