Market regulator Sebi on Friday asked investment advisors to do proper risk profiling of clients and obtain their consent on this before any advice.

The regulator also restrained investment advisors from providing free trial for any product and service.

The measures, aimed at strengthening the conduct of the advisors while providing advice and protecting the interest of investors seeking their advice, will come into effect from January 1, 2020, the regulator said in a circular.

The Securities and Exchange Board of India (Sebi) noted that investment advisors (IAs) are providing advice on a free trial basis without considering the risk profile of the clients.

“The IAs shall not provide free trial for any products/services to prospective clients. Further, IAs shall not accept part payments (where some part of the fee is paid in advance) for any product or service,” it added.

The regulator said investment advisors will provide advice only after completing the risk profile of the client based on information provided by them.

They need to obtain the consent of the client on the completed risk profile either through a registered email or physical document.

Sebi has asked advisors to accept fees through banking channels only. It has clarified that the advisors shall not accept cash deposits.

Sebi has observed that investment advisors are receiving advisory fee in the form of cash in their bank accounts or through payment gateways which does not provide a proper audit trail of fees received from the clients.