New Delhi, March 16 With the aim of strengthening the investment advisory ecosystem, the markets regulator, Sebi, is working on a series of measures, including a standardized, light-touch penalty structure, a digital regulatory guidance platform, and a common advertising code, its chairman, Tuhin Kanta Pandey, said.
Speaking at an event organized by the Association of Registered Investment Advisers (ARIA), Pandey said the investment advisory ecosystem in India is currently at an important stage of transition.
Currently, there are approximately 1,000 registered investment advisors (IAs) in the country – about 470 individuals and 530 non-individual entities.
He said the regulator is working on a standardized, light-touch penalty structure aimed at encouraging compliance while ensuring transparency and fairness.
"A standardized, light-touch penalty structure for IAs is being developed. This should promote compliance while ensuring transparency and fairness," he said.
The regulator is also developing a digital platform – SEBI SETU – to provide simple, end-to-end regulatory guidance for investment advisors, covering the entire lifecycle from registration to ongoing compliance, he added.
In addition, the regulator is preparing a common advertising code for all intermediaries to reduce operational challenges and improve consistency in communication.
Among other initiatives, a working group has been constituted to review the existing regulatory framework for Mutual Fund Distributors (MFDs) and examine overlaps, if any, between MFDs and investment advisors.
Pandey said a simplified certification module is also being developed by the National Institute of Securities Markets (NISM) for individuals associated with investment advice who are engaged in sales and other non-core functions.
However, he expressed concern over the declining number of registered investment advisors despite a rapidly expanding investor base.
"It is a matter of concern that the number of registered investment advisors has declined since 2021. As India's investor base expands rapidly, our market needs more regulated advisors. Otherwise, the gap will be filled by unregulated voices such as influencers, who present opinion as expertise and speculation as strategy," Pandey said.
According to Sebi's Investor Survey, nearly 62 per cent of prospective investors are influenced by influencers, which he described as undesirable as it distorts investor behavior, weakens discipline and erodes trust.
"The issue is not only regulatory – it is also cultural. Investors tend to gravitate towards 'free' recommendations, as the habit of paying for professional financial advice is still evolving in India," he said.
Pandey added that the key challenge is to make the registered advisory model viable, scalable, and attractive for qualified professionals.
He also noted that artificial intelligence is likely to impact advisory functions that are repetitive and template-driven. However, he said that financial advice goes beyond processing information and relies heavily on judgment, context, and trust.