The Securities and Exchange Board of India has launched SEBI SETU this month to address a critical gap in India's financial markets, as reported by The Hindu BusinessLine and NewsCorp. The platform comes at a crucial time when over 220 million demat accounts are active in the market, but the number of registered investment advisers remains below 1,000. This significant imbalance means many new investors lack professional guidance, creating potential risks for retail participants in an increasingly complex financial environment.
SETU serves as a single-window interface designed to guide applicants through the registration process and help existing advisers navigate ongoing compliance requirements, according to sources familiar with the development. As reported by The Hindu BusinessLine, the platform is aimed at making the compliance process simpler and more navigable, especially for those currently outside the regulated framework. SEBI Chairman Tuhin Kanta Pandey had earlier stated that the platform provides simple and end-to-end regulatory guidance from registration to ongoing compliance for IAs. The system is specifically designed to cut down on complex and burdensome administrative tasks that have been a frequent complaint from those looking to become advisors.
Among the changes being implemented, advisers can now share past performance data with clients through one-to-one communication using standardised templates vetted by professionals from the Institute of Chartered Accountants of India or the Institute of Cost Accountants of India, as reported by The Hindu BusinessLine. Advisers will also be allowed to offer second opinions on pre-distributed financial products, with fees linked to Assets Under Advice capped at 2.5 per cent annually, subject to disclosures and client consent. Individual advisers crossing regulatory thresholds may be allowed to continue onboarding clients during the transition period.
Eligibility norms have been simplified with any graduate eligible to register as an IA or RA, subject to certification from the National Institute of Securities Markets, according to The Hindu BusinessLine. Documentation requirements have also been reduced, with applicants no longer required to submit CIBIL reports or detailed asset-liability or infrastructure disclosures upfront. These changes are part of a series of regulatory relaxations introduced over the past year to ease entry and reduce compliance burden for advisers and research analysts.
While SEBI aims to grow the advisor base through SETU, the simplified entry rules and documentation carry risks that could impact market quality. Previously, strict compliance and capital requirements were major deterrents, but significantly easing these rules might lower the quality and experience of new advisors. This could lead to more unqualified advice, potentially causing retail investors to make costly mistakes, especially in a volatile market. The platform's success will depend on its ability to attract new advisors and ensure they act with honesty and skill, which is vital for the long-term growth and stability of India's investment environment. Unlike more developed markets with balanced advisor-client ratios and strong professional standards, India's developing advisory sector might struggle with a rapid rise in less experienced advisors.
