RIAs UNDER WATCH: NEW INVESTOR CHARTER MANDATES AI DISCLOSURES & COMPLAINT TRANSPARENCY

SEBI continues its regulatory tightening by empowering investors and pushing for AI transparency. On June 2, 2025, SEBI issued a circular bearing reference number SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/80 which sets out an updated ‘Investor Charter’ for Investment Advisers (“RIAs”). This revised framework replaces the earlier version issued through Circular No. SEBI/HO/IMD/IMD-II CIS/P/CIR/2021/0686 dated December 13, 2021 and amends Clause 8 of the Master Circular for Investment Advisers dated May 21, 2024.

1. New Investor Charter by Investment Advisers: The revised Investor Charter has been issued with a view to enhancing investor protection, fostering greater transparency in advisory practices, and strengthening the grievance redressal ecosystem in light of regulatory advancements such as the launch of SCORES 2.0 and the SMARTODR Platform. RIAs must immediately update their Investor Charter to reflect the change or risk regulatory scrutiny.

2. Dissemination of the Investor Charter: Pursuant to the revised Investor Charter, SEBI has directed the BSE Limited, which currently acts as the Investment Adviser Administration and Supervisory Body (IAASB), to ensure that all registered RIAs make the updated Investor Charter prominently available to clients. This includes publishing it on their websites and mobile applications, displaying it at their offices, and providing copies during the client onboarding process, including via emails and letters.

3. Disclosure of Complaints: Further, all RIAs are now required to disclose monthly data on complaints received and resolved by them in a specified format, with such disclosures to be updated on their digital platforms by the 7th of every subsequent month, thereby improving public oversight and ensuring prompt grievance handling.

4. Use of Artificial Intelligence tools: The updated Investor Charter reiterates the obligation of RIAs to uphold fair practices, including conducting proper risk profiling, disclosing conflicts of interest, and refraining from discriminatory practices while also placing emphasis on data privacy and prohibiting the use of client information without appropriate legal/ contractual basis. Notably, the Investor Charter now requires disclosure of the extent of use of artificial intelligence tools in rendering advisory services to their clients.

5. Rights of Investors: The rights of investors have been expanded under the Investor Charter to include, inter alia, the right to transparent and suitable advice, the right to exit the advisory relationship in accordance with agreed terms, and the right to fair advertising and data protection. Additional safeguards have also been introduced for vulnerable and differently abled investors, ensuring inclusive access to financial advice.

6. Caution note: The Investor Charter urges investors to engage only with SEBI-registered advisers, to verify registration credentials, and to avoid cash payments or falling prey to unsolicited offers promising assured returns. It encourages vigilance in reviewing all terms and conditions, and mandates that advisory fees be paid only through formal banking channels.

This revised Investor Charter has come into immediate effect and represents a continued push by SEBI to instil robust regulatory discipline in the investment advisory ecosystem. RIAs should review their advisory policies and client engagement strategies to align with the new Charter’s obligations.