Why you cannot complain to Sebi about unregistered investment advisors

Kumar, a registered investment advisor, wrote to Sebi through the SCORES platform that “this complaint is not related to us at all”. It took 13 days of back-and-forth to close the complaint.

Rohitash Pandey was on the other side of the complaint. He had lost around ₹56,000 when he started investing through an app based on a WhatsApp group forward.

He confessed that he knew the complaint was against another Abhishek. However, he said he had no choice as Sebi allowed complaints to be filed only against registered entities. “I just wanted to reach out to them anyhow,” said Pandey, who claimed that the police caught the miscreant but didn’t take any action. 

To be sure, the market regulator is indeed cracking down on those acting as investment advisors without a licence. In 2024, Sebi issued 27 notices against unregistered investment advisors, fined them, and banned many of them from operating in the stock market.

However, many, like Pandey, who want to complain against a particular entity acting as an investment advisor without a licence don’t have an official channel to lodge their complaints with Sebi. The market regulator’s complaints resolution platform accepts complaints only against registered entities.

Emails sent to Sebi regarding how they receive complaints against those providing unregistered investment advisory remained unanswered till press time.

Redressal channels

Sebi launched the SCORES platform in 2011. People can lodge complaints against Sebi-registered entities directly through the online portal. 

BSE also allows complaints to be filed anonymously against registered investment advisors and research analysts through its whistleblower policy. However, in SCORES, complainants can’t hide their identity.

Sebi’s 2023-24 annual report showed 843 complaints were received against registered investment advisors, up from 675 the previous fiscal year. The same year, research analysts and portfolio managers received 226 and 99 complaints each. However, these are complaints related to only Sebi-registered entities. BSE’s subsidiary, BSE Administration and Supervision Ltd (BASL), supervises investment advisors and research analysts.

A registered investment advisor, on the condition of anonymity, said they were provided with an email ([email protected]) on which they could send complaints against unregistered entities. However, it has not led to any action against unregistered entities.

Anil Choudhary, a partner at Finsec Law Advisors, said if they encounter someone providing unregistered investment advice, they can try to send letters or emails to the relevant department. Still, there is no official channel to place their complaints.

He added it’s difficult to approach the police as it has to be a criminal offence. “If someone is simply providing investment advice without registration, that will not make it a criminal offence unless they are classified as fraud and can prove that they are siphoning off money.”

Meanwhile, experts are divided on whether Sebi should directly address complaints from unregistered entities. While some point to Sebi’s lack of bandwidth to handle the high volume of cases, others feel Sebi should be responsible for the overall promotion and development of the securities market. 

After all, the first line of the Sebi Act, 1992, reads: “To protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto.”