Sebi issues comprehensive T&C for clients of investment advisors, analysts

The Securities and Exchange Board of India (Sebi) has mandated investment advisors (IAs) and research analysts (RAs) to disclose and obtain client consent on a more detailed set of terms and conditions (T&Cs), known as the Most Important Terms and Conditions (MITC). 

 

The MITC, a two-page document, has been standardised by Sebi in collaboration with the respective industry standards forums for IAs and RAs.

 

It outlines critical information such as fee limits, exclusions of statutory charges, conditions for premature termination, prohibitions on assured or guaranteed returns, client risk profiling, market performance variability, associated risks, and the discretion investors must exercise before making investment decisions. 

 

Additionally, the MITC provides clear steps for clients to follow in case of grievances, including escalation to Sebi’s SCORES portal or the Online Dispute Resolution (ODR) website if resolutions remain unsatisfactory. 

 

The guidelines also specify that investment advisors can only accept payments for advisory services and are prohibited from receiving funds or securities into their accounts on behalf of clients. 

 

The circular explicitly states, “Research analysts shall never ask for a client’s login credentials or OTPs for their trading, demat, or bank accounts. Clients are advised never to share such information with anyone, including RAs.” 

 

Investment advisors are required to inform existing clients about the updated terms and conditions by June 30.

 

For new agreements, the MITC must be incorporated into the contract, and explicit client consent must be obtained. 

 

This move follows Sebi’s earlier introduction of similar MITC guidelines for stock brokers.

 

They were aimed at simplifying the communication of risks, tariffs, and policies to investors in an accessible format.