How to spot a genuine Sebi-registered financial advisor and avoid scams
New Delhi, Apr 23, 2025
Sebi mandates that individuals or entities offering investment advice must be registered under the Sebi (Investment Advisers) Regulations, 2013
In recent years, India has witnessed a disturbing rise in investment-related scams, many of which have targeted vulnerable groups like the elderly. Fraudsters often pose as financial advisers, luring investors with promises of guaranteed returns and once-in-a-lifetime opportunities. However, identifying a genuine Sebi-registered investment adviser (RIA) is not as complicated as it may seem—provided you know what to look for.
The Securities and Exchange Board of India (Sebi) mandates that individuals or entities offering investment advice must be registered under the Sebi (Investment Advisers) Regulations, 2013. Engaging with unregistered advisers can expose you to risks of financial scams.
The Letter of Engagement: Your First Line of Defense
Under the Sebi (Investment Advisers) Regulations, 2013, all Registered Investment Advisers are legally required to enter into a formal agreement with their clients before offering any financial advice or collecting fees. This document is known as a Letter of Engagement (LoE).
The LoE is a comprehensive agreement that outlines:
The scope of services
Fees and charges
Duration of the advisory relationship
Disclaimers and confidentiality clauses
KYC (Know Your Customer) details
Risk disclosures and more
Both parties—the investor and the adviser—must sign the document. A copy of this signed agreement must be provided to the investor. Importantly, no genuine RIA will demand or accept payment before this agreement is in place.
This step ensures transparency and protects the interests of both parties. If your adviser skips or downplays this process, consider it a major red flag.
Say no to Cold Calls and “Too Good to Be True” promises
Most investment scams begin the same way—with an unsolicited cold call, a WhatsApp message, or a slick email pitch. The message is always urgent and loaded with pressure: “Act fast before the opportunity disappears!” These fraudulent agents promise unbelievable returns in an unreasonably short time, playing on your fear of missing out (FOMO).
In contrast, a legitimate Sebi-registered adviser takes a solution-oriented approach. Instead of pushing financial products, they start by understanding your:
Financial goals
Life stage and responsibilities
Risk appetite
Income and expenses
Existing portfolio
Based on this assessment, a genuine adviser conducts a risk profiling exercise and evaluates the suitability of various investment options for you. This process is not just ethical—it’s a compliance requirement under Sebi regulations.
What You Should Remember
Never invest based on cold calls or messages promising “guaranteed” returns.
Insist on the Letter of Engagement and never make any payments before signing it.
Ask questions: A competent adviser will welcome your curiosity and explain their advice in terms you understand.
Verify the adviser's Sebi registration number on the official Sebi website.
Report any suspicious activity to Sebi or the Investor Helpline immediately.
To assist in identifying authentic Sebi-registered investment advisers, here is a comprehensive checklist:
1. Verify Registration on Sebi’s Official Website
Before engaging with an investment adviser, ensure they are registered with Sebi. You can verify this by visiting the Sebi website and searching for the adviser's details. The official list of Sebi-registered investment advisers is available here https://www.Sebi.gov.in/Sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=13.
Merely finding the RIA name on the Sebi website is not enough. Cross check and verify the phone/email with the details on the Adviser website. Also, reach out personally on mail or call to confirm if you are connecting with the right and genuine Adviser.
2. Check for a Valid Certificate of Registration
A legitimate Sebi-registered investment adviser will possess a valid Certificate of Registration issued by Sebi. This certificate confirms that the adviser has met Sebi's regulatory requirements and is authorized to provide investment advice.
3. Ensure Transparency in Fees and Charges
Genuine advisers disclose their fee structures upfront. They should provide clear information about the fees for their services and avoid hidden charges. Transparency in fees helps build trust and ensures there are no surprises later.
4.Avoid Advisors Promising Guaranteed Returns
Be cautious of advisers who promise guaranteed returns. All investments carry inherent risks, and no legitimate adviser can guarantee profits. Promises of fixed returns are often indicative of fraudulent schemes.
5. Beware of High-Pressure Sales Tactics
A reputable adviser will not pressure you into making quick investment decisions. If an adviser urges you to invest immediately or suggests that an opportunity is limited, it's a red flag. Take your time to evaluate any investment opportunity thoroughly.
6. Verify the Adviser's Professional Background
Check the adviser's qualifications and experience. A genuine adviser will have relevant certifications and a track record of providing sound investment advice. You can inquire about their credentials and past client experiences to assess their professionalism.
7. Look for Written Agreements
Always ensure that any agreement with an investment adviser is documented in writing. The agreement should outline the services provided, fee structure, and other pertinent details. Avoid verbal agreements, as they can lead to misunderstandings and disputes.
8. Report Suspicious Activities
If you encounter an adviser who seems suspicious or engages in unethical practices, report them to Sebi. Sebi has mechanisms in place to address grievances and take action against unregistered or fraudulent adviser.
"Remember that Sebi-registered Investment Adviser gets no commission from anywhere. He only charges a fee from the clients and hence, offers conflict-free investment advice which is customized for each client’s unique financial requirement via a solid financial plan – which can really sort out their financial lives," said Dev Ashish, a Sebi-registered RIA.
As per Ashish,a Sebi registered Investment Advisors (RIA) are not permitted to take custody of investor money.
RIAs can only provide advisory services.
RIAs cannot transact on your behalf. RIAs are not permitted to accept Power of Attorney from investors. Therefore, if you receive a request from anyone else claiming to be an RIA to transfer funds for investment on your behalf, you are dealing with a fraudster and not a genuine adviser.
Sebi regulations explicitly prohibit any monetary transactions between the investor and RIA except for the advisory fee.
[The Business standard]
