SEBI IA Suitability: Why a Form Is Not Enough
Short answer
What a risk profile should capture
SEBI expects the profile to rest on the client’s own information, scored, dated and consented to. A questionnaire that covers these fields gives you a defensible profile; adapt the wording to your practice.
| Field | Why it matters |
|---|---|
| Age and life stage | Sets the horizon and capacity for loss |
| Investment objective | Growth, income, preservation, a specific goal |
| Time horizon | When the money is needed, per goal |
| Income and its stability | Capacity to keep investing through a drawdown |
| Existing assets | What is already held, including outside your advice |
| Liabilities and dependants | Commitments that limit risk capacity |
| Investment experience | Products the client understands |
| Attitude to loss | The drawdown the client says they can live with |
Keep the answers, the resulting score or band, the date, and how the client consented (eSign, a signed copy or a reply from their registered email). The profile is only as good as that consent trail.
Why suitability on paper fails
A suitability form is filled in once and filed. Advice goes out every week. The gap between the two is where IA breaches happen, and they are all variations on the same theme.
| Failure | What happened | The fix |
|---|---|---|
| Profile expired | Advice sent on a profile older than a year | Re-assess before the next send |
| Finding missing | A recommendation with no suitability record behind it | Record the finding first |
| Not suitable, sent anyway | The assessment said no; the advice went out | Block the send |
| Stale finding | Assessed against an older profile | Re-assess against the current profile |
| Agreement unsigned | Advice before the agreement was signed | Hold advice until signed |
Turning the rule into a gate
The fix is to check the conditions at the moment of sending, every time: is the profile current, is there a suitable finding against that profile, and is the current agreement signed? If any answer is no, the advice waits. That check has to run where the send happens, not in a reminder email.
Aktai runs exactly that check for Investment Adviser accounts. Notes and recommendations cannot be sent to a client without a current risk profile, a suitable finding assessed against it and a signed copy of the active agreement; the send fails and shows which condition is missing. A coverage report lists every client who is missing, expired, not suitable or due soon, so you fix it before a send is blocked. See the advice gate.
Frequently asked questions
Is suitability mandatory for SEBI Investment Advisers?
Yes. An Investment Adviser must risk-profile each client, get the client’s consent to the profile, and assess whether each recommendation suits that profile before giving it. Advice without a current profile and a suitable finding is a breach.
What is the difference between risk profiling and suitability?
Risk profiling describes the client: objectives, horizon, finances and tolerance for loss. Suitability is the judgement that a specific recommendation fits that profile. One profile supports many suitability findings.
How often should an IA re-assess a risk profile?
At least once a year, and whenever the client’s circumstances change, for example a new job, retirement, an inheritance or a large liability. Advice on an expired profile should wait for the re-assessment.
Can an IA advise a client the assessment says is not suitable?
No. If the finding says the product does not suit the client, the advice should not go out. Record the finding and the reason; that record protects you in an inspection.
Related reading
General information, not legal or compliance advice. SEBI rules change: check the current SEBI Investment Advisers Regulations, the Master Circular for Investment Advisers and recent circulars, and confirm your own position with your compliance officer.