An analysis conducted by the Association of Registered Investment Advisors (ARIA) on complaints and orders issued by the Securities and Exchange Board of India (SEBI) has highlighted the risks associated with providing trading calls and participating in stock market trading.
The majority of complaints filed against financial advisors—both registered with SEBI and unregistered—along with enforcement orders issued by SEBI, are primarily related to trading calls offered by these entities. In a press release, ARIA emphasized the need for targeted action against unregistered entities and called for a distinct approach for Registered Investment Advisors (RIAs) who do not provide trading calls.
The analysis covered grievances submitted against RIAs via SEBI’s SCORES website up to June 30, 2024, and revealed that 71 percent of SEBI’s enforcement orders were issued against unregistered financial advisors.
In the context of trading call providers, 73 percent of the complaints against RIAs were linked to this group. Among the 44 SEBI orders against RIAs, 77 percent were related to trading call providers. The study analyzed orders issued since the entities’ inception until March 31, 2024, and found that 72 percent of these orders involved services related to derivatives (futures, options, and commodities), followed by equity (39 percent) and intra-day or high-frequency equity trading (23 percent).
Furthermore, 97 percent of SEBI’s enforcement orders (104 out of 107) targeted unregistered investment advisors offering trading calls. The study noted that enforcement actions predominantly focused on trading call providers, regardless of their registration status, and that last year’s analysis yielded similar findings.
Interestingly, a small proportion of RIAs are responsible for the majority of complaints. According to ARIA’s analysis, 74 percent of RIAs have not had any complaints filed against them via the SCORES portal. However, 10 percent of RIAs (97 out of 963) accounted for 94 percent of the complaints, with over 700 RIAs not receiving a single complaint. Sole proprietorships represented 59 percent of the complaints, while LLPs and individuals accounted for a negligible percentage.
