SEBI allows part-time investment advisers, puts conditions for AI tools use: All you need to know

The Securities and Exchange Board of India (SEBI) on Tuesday notified new rules for investment advisers (IAs), including a provision for "part-time investment advisers" who can offer advice while being involved in other jobs or businesses.

According to the latest amendments, part-time investment advisers can provide advisory services while engaging in other businesses or employment. However, their client base has been capped at 75, and they must clearly identify themselves as “part-time investment advisers” in all communications with clients.

SEBI has also clarified that such advisers must keep their advisory services separate from their other business activities.

Under the updated regulations, individuals with a graduate degree in any discipline and relevant certification from the National Institute of Securities Markets (NISM) can now qualify as investment advisers. Previously, stringent requirements like a postgraduate degree in finance or an MBA, along with five years of experience, made it challenging for professionals to enter the RIA business.

Clients caps for RIAs

SEBI has also relaxed client caps for RIAs. Individual investment advisers can now cater to up to 300 clients before being required to transition to a corporate entity, up from the earlier limit of 150 clients. Individuals managing more than 300 clients or earning over ₹3 crore annually from advisory fees will have to register as a company or firm instead of remaining individual advisers.

For non-individual RIAs, net worth requirements will vary based on client size—₹1 lakh for up to 150 clients, ₹2 lakh for 150–300 clients, ₹5 lakh for 300–1,000 clients, and ₹10 lakh for over 1,000 clients.

Condition for using AI tools

In a move to protect investors, SEBI has made it mandatory for advisers using Artificial Intelligence (AI) tools to disclose this to clients. They will also be fully responsible for keeping client data secure and confidential.

“An investment adviser who uses Artificial Intelligence tools, irrespective of the scale and scenario of adoption of such tools, for servicing its clients shall be solely responsible for the security, confidentiality, integrity of the client data, use of any other information or data to arrive at investment advice, investment advice based on output of Artificial Intelligence tools and compliance with any law for the time being in force,” the notification said.

“An investment adviser shall disclose to the client the extent of use of Artificial Intelligence tools in providing investment advice,” it added.

Despite being in place for over 11 years, SEBI's RIA framework has seen limited adoption, with only 995 RIAs registered—a ratio of just one adviser for every two lakh investors in India. The revised guidelines are expected to make the profession more accessible, sustainable, and scalable, benefiting both advisers and investors.