Crackdown on Trading Call Providers: Why SEBI Is Tightening Oversight
The Association of Registered Investment Advisors (Aria), in its 10 November report, flagged breaches by trading call providers (TCPs), who offer “guaranteed” returns. As Sebi looks to distinguish registered advisors from speculative callers, the need for caution is rising.
Who are trading call providers?
TCPs are individuals or firms offering short-term buy-sell tips, intraday calls, or derivative recommendations, typically for a fee. Focused on speculative trades, they differ from fiduciary advisers who tailor for holistic financial goals.
Many operate via social media or messaging apps, enticing investors with promises of high or guaranteed returns.
Sebi’s action follows a surge in complaints. Aria’s study of 218 enforcement orders over 10 years found nearly two-thirds targeted unregistered entities, all of whom were TCPs. Even among 71 orders against registered entities, over 90% involved TCPs.
What Changed in December 2024?
The December 2024 amendment to the Investment Adviser (IA) Regulations marked a major shift. Sebi ruled that entities offering trading calls, intraday tips, or derivative recommendations can no longer register as investment advisers.
The 2013 framework for long-term planners was being misused by TCPs who registered despite focusing on stock tips and violating norms with daily calls, aggressive marketing tips, marketing, and opaque fees.
Under the new rules, those providing research for a fee must register as research analysts. This helps investors separate fiduciary advisers from tip sellers’ marketing and strengthens SEBI’s enforcement.
What Kind of Violations Has Sebi Found?
Aria’s review of FY25 enforcement orders is worrying. Of 50 cases:
15 involved registered TCPs, with lapses such as missing client pacts, coerced risk-profile signatures, misselling, bogus claims, and inadequate qualifications.
31 orders on unregistered TCPs involved false claims, guaranteed-return promises, and unauthorized advisory services.
Why Are Unregistered TCPs Trickier?
Registered TCPs—even though no longer eligible as investment advisers—remain within Sebi’s oversight as research analysts. Their records, fees, and client lists can be examined. Sebi can levy penalties or cancel registrations.
Unregistered TCPs operate outside this ambit, often promoting “jackpot calls” or “100% accuracy” online. With no record-keeping or disclosures, investor redress becomes extremely difficult.
Aria found 87% of Sebi actions against unregistered TCPs in FY25 originated from investor complaints or media alerts.
How Does This Affect Genuine Investment Advisers?
While the crackdown has improved transparency, it has also made compliance more demanding for legitimate advisers. Many face:
Higher operational costs
Stricter documentation
Increased scrutiny
This can discourage small, independent advisers.
Renu Maheshwari, chair of Aria and a Sebi-registered investment advisor, highlighted that only six complaints against investment advisors have been recorded since 2013, and none involved money, only procedural issues.
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