SEBI notifies new guidelines for investment advisors: What’s changing for RIAs?

SEBI has introduced new guidelines to make the Registered Investment Advisor (RIA) framework more accessible and practical. Now, a graduate degree along with relevant NISM certification, is sufficient to qualify as an investment advisor.

Previously, obtaining an RIA license was challenging, requiring an MBA in finance or a postgraduate degree and five years of relevant experience. These stringent qualifications discouraged many from entering the profession. “We struggled to find qualified professionals. A PG degree in finance was mandatory, making it difficult to start, sustain, and grow an RIA business,” Lovaii Navlakhi, Chairperson of the Association of Registered Investment Advisors (ARIA) told Business Today. The new rules are expected to ease this burden.

Under the updated regulations, RIAs can now cater to up to 300 clients before transitioning to corporate status, up from the earlier cap of 150 clients. Additionally, net worth requirements for non-individual RIAs now vary by client base. Now up to 150 clients it is Rs 1 lakh, for 150–300 clients it is Rs 2 lakh, for 300–1,000 clients it is Rs 5 lakh and over 1,000 clients it is Rs 10 lakh.

The guidelines also address part-time RIAs, limiting them to 75 clients and requiring the term “part-time investment adviser” in all client communications. Advisors must disclose the use of AI tools in their services and inform clients when products or services fall outside SEBI’s regulatory purview.

Despite being in place for 11 years, SEBI’s RIA framework has seen limited adoption, with just 995 RIAs registered—a mere one advisor for every two lakh investors in India.

The revised guidelines aim to bridge this gap and encourage more professionals to join the advisory profession.