SEBI vs Investment Advisors: Almost all Enforcement Orders are against Trading Call Providers, says ARIA
October 3, 2023 16:03 IST
Almost all the SEBI Enforcement orders are against Trading Call Providers, with the rest of the orders being on operational matters and not client-related services, according to an analysis of Enforcement orders passed by the Securities and Exchange Board of India against Investment Advisors.
The analysis of all enforcement orders passed by SEBI against Investment advisory firms since inception till June was commissioned by the Association of Registered Investment Advisors (ARIA) to Sanjay Kadel & Co. Chartered Accountants.
The analysis found that there were a total of 56 SEBI enforcement orders against unregistered entities while 22 orders were against registered entities.
However, most of the orders were against trading call providers. The ARIA report says as many as 56 SEBI enforcement orders were against unregistered trading call providers while 18 orders were against registered entities.
There were no SEBI enforcement orders against unregistered investment advisors while four orders were against registered investment advisors.
Trading call providers (TCP) include providers of advice pertaining to — Non-delivery trades, Equity Intraday, Buy Today Sell Tomorrow, Derivatives like futures, options, commodities (except for hedging purposes), and leveraged trading or increasing exposure to equity shares beyond 100% of the portfolio value.
“This analysis indicates that action needs to be taken against unregistered Investment Advisers and RIAs which are not “Trading Call Providers” need to be treated differently as their activities have not led to any enforcement actions being required from the regulator,” ARIA said in a statement.
Complaints against RIAs
| 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% |
Source: ARIA
ARIA also carried out a detailed analysis of complaints received against RIAs on the SEBI SCORES portal. The analysis shows interesting statistics, highlighting how 9% of RIAs account for 94% of all complaints received against RIAs and 78% of RIAs have Nil complaints so far.
“From their names and the other details of these entities it appears that all of them are ‘Trading Call Providers’, ARIA said.
ARIA Recommendations
From this complaints analysis, it would appear that RIAs that are not “Trading Call Providers” need to be treated differently as their activities have not led to complaints from investors, said ARIA.
“Both these analysis reports point to the need for sharply focussed action against Unregistered entities and treatment of non ‘Trading Call Providers’ RIAs separately for relaxed regulations,” it added.
[The Financial Express]
