Common mistakes of RA

  1. Individual IAs cannot provide distribution services as per SEBI regulations, and non-individual IAs must segregate these services from investment advisory activities.
  2. Submitting incomplete or inaccurate Form A applications, using outdated documents, or failing to meet the required qualification and experience criteria can lead to application rejection.
  3. Providing investment advice without the necessary SEBI registration or failing to comply with the specific requirements for investment advice.
  4. Display of Past Performance: RAs showcased historical returns and shared client success stories or profit screenshots in pitches without consent, violating advertisement guidelines.
  5. Failure to Maintain Duly Signed and Dated Copies of Research Reports: Reports lacked proper versioning or signatures, making them unverifiable during audits.
  6. Failure to Maintain Rationale for Research Recommendations: The reasoning behind buy/sell calls wasn’t documented well.
  7. Missing Disclosures in Research Reports and Public Appearances: Mandated disclosures under RA Regulations—such as conflicts, holdings, or compensation—weren’t included in reports or media interactions.
  8. Failure to Intimate SEBI of Material Changes: Changes in research analysts, directors / partners and other changes weren’t reported timely.
  9. Non-Maintenance of Records: Overall lapses were observed in keeping client interaction logs, KYC documents, research backups, or compliance files.
  10. Non-compliance of client onboarding process: RAs failed to register with KRAs, thus leading to incomplete KYC process. Also, client consent was not recorded on the terms and conditions of RA service.
  11. Advertisements Issued Without Relevant Approval: Marketing materials were issued without taking approval from RAASB / BSE.
  12. Non-adherence to fee limits: RAs charged fees in excess of the limits prescribed by SEBI.

    13. “Just to let you know that the RAs also have to submit the report to BSE and have similar reporting requirements as IAs.” I added.

    “Sure. Please help me understand, what will happen once IAASB (BSE) goes through the report. Will any action be taken against my firm?”

    “As you may be aware that SEBI / BSE are conducting surprise inspections. They may take these reports as base during inspections. If they note that there is no action taken by the management on the observations, they will definitely take action. Depending on the level of non-compliance, SEBI may penalise the firms or suspend the registration.”

    “I got it, Kruti. Thank you. I will be in touch with you for further course of action.”

  13. Failure to redress client’s grievances within the timelines specified under SEBI circulars
  14. Failure to maintain the signed research report and rationale.
  15. Failure to maintain proper reliable information basis which the research reports were generated and recommended to its clients for making Investment decision.
  16. Investor Charter uploaded on the website contains incorrect details with respect to grievance redressal
  17. Non-publication of the status of the compliance audit report on the RA’s website, including the non-disclosure of adverse audit findings along with the corrective actions undertaken.
  18. Failure to maintain the proper segregation between its activities as research analyst and other business activities.
  19. MITC not incorporated in T&C signed with the clients
  20. Fees charged above Rs. 1,51,000/- p.a. to individual clients
  21. Failure to maintain the deposit as specified by in SEBI circular for clients served
  22. Failure to provide compliance audit report to clients of the RA
  23. Failure to redress client’s grievances within the timelines specified under SEBI circulars.
  24. RA has failed to publish updated and correct complaints data on its website.
  25. Non display of specified Investor charter on website and mobile applications. If website/ mobile application is not maintained, investor charter emails not sent to clients.
  26. Misguiding clients by mentioning services provided by Investment Adviser in website, communication with client and welcome kit sent to clients.
  27. Soliciting clients for personalized advisory services
  28. Making misleading claims in website such as ‘best’, ‘authentic’/ affiliated with MIIs.
  29. Promising assured returns to clients.
  30. Publishing of unverified and misleading claims regarding the number of research analysts employed by the firm and accuracy of the research recommendations in its website.
  31. Sharing screenshots of profits earned by previous clients to the prospective clients. Inducement to infuse more capital, despite losses incurred on previous recommendations, with a promise to recover the losses.
  32. Failure to maintain duly signed and dated copy of research report.
  33. Failure to maintain rationale for arriving at research recommendations
  34. Disclosures as mandated under RA Regulations were not made in research reports distributed by the RA.
  35. Failure to intimate SEBI with respect to material changes such as change in principal place of business, opening of corporate office.
  36. Mentioning of address not currently rented/owned by RA in its website.
  37. Not having appropriate rent agreement/ Mention of incorrect business in rent agreement.
  38. Incorrect information provided to the Inspection team.
  39. RA has not exercised appropriate due diligence during appointment of employees.
  40. Employed persons with expertise of working in investment advisory firms, which raises doubt on operations of RA.
  41. Non-monitoring of communications between employees and clients/potential clients leading to instances of employees of RAs assuring returns from the stock recommendations of the RA.
  42. Not obtaining fresh NISM certification specified for research analysts prior to expiry of old certification