SEBI Investment Adviser Compliance in 2026: The Suitability Gate, Fee Caps, and Records
A SEBI Research Analyst publishes a note and moves on. An Investment Adviser cannot. Before any advice reaches a client, the IA has to prove the client was risk-profiled, that the advice was suitable, and that a signed advisory agreement exists. Miss one of those and the advice should never have gone out. This is the compliance spine that separates the IA regime from the RA regime, and the part most solo advisers run by memory until an inspection asks for the paper.
Note: General guidance only, not legal advice. Confirm suitability, fee, and disclosure requirements against the current SEBI Investment Advisers Regulations 2013 and the latest SEBI circulars before acting. Fee figures change; verify them.
The word that does all the work in the IA regime is suitability. An RA serves a subscriber list: the same research can go to everyone, with the standard disclaimers. An IA serves a person, owes that person a fiduciary duty, and has to be able to show, for any advice given, that it fit the client's risk profile and circumstances at the time. That single difference cascades into everything else: mandatory profiling, a suitability gate, a different agreement, capped fees, and a tighter audit trail.
IA versus RA, at a glance
Left column is the RA position, right column is the IA position. For a fuller treatment see Research Analyst vs Investment Adviser.
The six obligations that define the IA regime
Risk profile every client, keep it current
A documented risk profile (horizon, experience, income, risk tolerance, dependants) with a score and a date. It expires: re-assess at least annually, and amber the client as it nears expiry. Advice on an expired profile is a breach.
Assess suitability before advising
Each advice must map to a suitability finding for that client. If the assessment says NOT_SUITABLE, the advice does not go out. Suitability is not a one-time form, it is the precondition that gates every recommendation.
Signed advisory agreement first
The IA advisory agreement with the SEBI standardised MITC for IAs, signed before any advice. Distinct from the RA-client agreement. Captures scope, the fee mode and cap, conflicts, and grievance redressal.
Cap and disclose the fee
One fee mode per client: 2.5% of AUA per year, or Rs 1,51,000 fixed per family per year. No performance fees. Disclose the arrangement and the cap to the client and stamp it on every invoice.
Disclose conflicts and holdings
A firm-level conflicts and holdings disclosure attached to advice and visible to the client. If you or an associate hold the security you are advising on, the client must be able to see it.
Keep the audit trail for five years
Every piece of advice linked to the risk profile and suitability record it was justified against, retrievable on inspection. This immutable link is the document a SEBI inspector asks for first.
The suitability gate is the whole game
On paper most advisers agree with all six obligations. In practice the failure mode is always the same: the advice goes out first, and the paperwork is supposed to catch up. A client signs up on Monday, asks a question on Tuesday, and gets an answer before the risk profile or the agreement exists. By the time anyone reconciles the records, the advice has already left the building, and there is no way to prove it was suitable when it was given.
The fix is to make suitability a gate, not a form. Advice to a client should be physically blocked unless three things hold at the moment of sending: a risk profile that has not expired, a current suitability finding that is not NOT_SUITABLE, and a signed advisory agreement. If the system enforces that, an adviser cannot mis-serve an un-assessed client even by accident, and can prove it on inspection. If it only reminds, the reminder gets ignored on the busy day, which is exactly the day the breach happens.
Fees: capped, disclosed, and on every invoice
SEBI caps IA fees two ways and lets the client pick one mode at a time: AUA-based at up to 2.5% of assets under advice per year, or fixed at up to Rs 1,51,000 per family per year. Performance-linked or profit-share fees are out. The trap is not the cap itself, it is the disclosure: the fee arrangement and the applicable cap have to be visible to the client and recorded. An invoice that just says โadvisory fee: Rs Xโ with no mode and no cap reference is a thin record. The clean version stamps the mode and the per-annum cap on the client portal and on every invoice line, so the fee is self-documenting.
For the AUA mode that means computing assets under advice from the client's actual holdings, mark-to-market, so the 2.5% is measured against a real number you can defend, not an estimate.
Periodic review is part of the obligation, not optional hygiene
A risk profile is not a one-time artifact. SEBI expects an IA to re-assess suitability at least annually, which means the profile has an expiry and the adviser needs to see it coming. A compliance calendar that surfaces, per client, whether the risk profile is MISSING, EXPIRED, EXPIRING, or CURRENT, and whether suitability is CURRENT or stale, turns โI think we are fineโ into a list of names to fix before the regulator finds them. The clients advised without current suitability are the breach; seeing them first is the point.
How Aktai enforces the IA regime
Aktai's Investment Adviser software builds these obligations into the product rather than leaving them to discipline. The advice gate blocks a send to any client who lacks a current risk profile, a valid suitability finding, and a signed IA advisory agreement, server-side and default-closed, so the breach cannot happen by accident. Fee plans are cap-checked against the 2.5% AUA and Rs 1,51,000 fixed limits, with AUA computed from live holdings, and the mode and cap are disclosed on the client portal and stamped on every invoice. A firm-level conflicts and holdings disclosure attaches to advice and shows on the portal. The compliance calendar reports per-client suitability coverage so gaps surface before an inspection. Every piece of advice is linked to the suitability record and risk profile it was justified against, giving you the five-year audit trail an inspector asks for first. It is built for the Indian IA regime only, gated to IA registrations.
FAQ
What is the difference between a SEBI Research Analyst and an Investment Adviser?
A Research Analyst (RA) issues research and recommendations to subscribers as a broadcast. An Investment Adviser (IA) gives personalised advice to a specific client and owes a fiduciary duty to that client. The IA obligation is heavier: per-client risk profiling and suitability, a signed advisory agreement, capped fees, and disclosure of conflicts. An RA can publish the same note to a thousand subscribers; an IA must show that each piece of advice fit the client it went to.
Is risk profiling and suitability mandatory for SEBI Investment Advisers?
Yes. Under the SEBI Investment Advisers Regulations 2013, an IA must risk-profile every client, assess suitability before advising, and re-assess periodically (at least annually). Advice given to a client without a current risk profile and a valid suitability finding is a compliance breach. This is the single biggest practical difference from the RA regime, where suitability is expected but not formally gated.
What are the fee limits for a SEBI Investment Adviser?
SEBI caps IA fees two ways and the client picks one mode at a time. AUA-based: up to 2.5% of assets under advice per year. Fixed: up to Rs 1,51,000 per family per year. Performance-linked or profit-share fees are not permitted. The fee arrangement and the cap should be disclosed to the client and recorded. Confirm the current figures against the latest SEBI circular before quoting them.
Does an Investment Adviser need a signed advisory agreement before giving advice?
Yes. The IA must have a signed advisory agreement (incorporating the SEBI standardised Most Important Terms and Conditions for IAs) in place with the client before advice is provided. It is distinct from the RA-client agreement. The agreement covers scope, fees, the fee cap, conflicts, and grievance redressal including SCORES. No agreement means no advice.
How long must an Investment Adviser keep records?
Five years minimum, retrievable on inspection. For an IA this includes the KYC, the risk profile and its date, the suitability assessment, the signed advisory agreement, the fee record, and a log of the advice given with the suitability basis it was justified against. The audit trail linking each piece of advice to the suitability record is what an inspector asks for first.