Investment adviser
Also written Investment Adviser (Offshore Structure)
Any person who, for consideration, is in the business of giving investment advice, including anyone holding out as one — but not an AMFI-registered distributor whose advice is incidental to distribution.
In plain language
This definition comes from the SEBI (Investment Advisers) Regulations, 2013. In simple words, an investment adviser is someone who gives investment advice as a business and is paid for it. The rule also covers anyone who claims to be an adviser, whatever name they use.
The exact wording is worth knowing. An investment adviser is any person, who for consideration, is engaged in the business of providing investment advice to clients or other persons or group of persons. It also includes any person who holds out himself as an investment adviser, by whatever name called. "For consideration" means for a fee or some other payment. To "hold out" means to present yourself to others as one.
For a distributor, the key part is the exception. The rule leaves out a mutual fund distributor (MFD) registered with AMFI. But this holds only when the advice is incidental to its primary activity of distribution. Incidental means the advice comes along with the main job of selling funds. So an MFD can talk to a client about which fund suits her. It does not have to register with SEBI as an adviser for that.
Chapter 6 points out two results. First, a distributor cannot call itself an investment adviser. If it did, it would be holding out as one, and the rule would catch it. Second, an investment adviser cannot earn both an advisory fee and a distribution commission. The two jobs have to be kept apart.
How it works
The line between the two roles runs through several parts of the workbook:
| AMFI-registered MFD | SEBI-registered investment adviser | |
|---|---|---|
| Registration | AMFI, after the NISM V-A examination | SEBI, under the Investment Advisers Regulations, 2013 |
| Advice | Only incidental to distribution | The business itself, for consideration |
| Paid by | Commission from the AMC | Fee from the client |
| May use the words adviser, advisor, wealth manager, consultant | No | Yes |
Names. AMFI's Code of Conduct for Intermediaries (Appendix 3), citing Regulation 3(3) of the IA Regulations, bars an MFD from using Adviser / Advisor / Financial Adviser / Investment Adviser / Wealth Adviser / Wealth Manager / Consultant or any similar name unless registered with SEBI as an investment adviser. The MFD must tell the client it is acting as an MFD and display the tagline AMFI-registered Mutual Fund Distributor.
Segregation. The same code reminds MFDs of the obligation on segregation of distribution and advisory services under the IA Regulations.
What the MFD still owes the client. Its transactions are either advisory (subject to appropriateness) or execution only (with a written warning where the product looks inappropriate). There is no third category, and suitability must be checked either way — not taking reasonable care over suitability is mis-selling under the SEBI PFUTP regulations.
A worked example
Illustrative. The people and amounts are hypothetical; the rules are the workbook's.
Kavita has Rs 10,00,000 to invest in an equity scheme and speaks to two professionals.
Ramesh, an AMFI-registered MFD. He recommends the regular plan and is paid commission by the AMC out of the scheme's expenses. Suppose his annual trail works out to 0.80 per cent: Rs 10,00,000 × 0.80% = Rs 8,000 a year, which Kavita never sees as a bill. His visiting card may say AMFI-registered Mutual Fund Distributor. If it said Wealth Adviser, he would breach the code of conduct.
Priya, a SEBI-registered investment adviser. She charges Kavita a fee of, say, Rs 15,000 a year and recommends the direct plan, whose expense ratio excludes distribution commission. Priya cannot also take the Rs 8,000 commission — that would be earning from both advisory and distribution.
| Ramesh (MFD) | Priya (IA) | |
|---|---|---|
| Plan recommended | Regular | Direct |
| Paid by | AMC (commission) | Kavita (fee) |
| Annual cost to Kavita in this illustration | Rs 8,000 inside the NAV | Rs 15,000 fee |
| May call himself or herself an adviser | No | Yes |
Neither route is automatically cheaper; the point is that the source of pay and the title must match the registration.
Why NISM asks about it
Chapter 6 (Fund Distribution and Channel Management Practices), section 6.8, gives the definition, the exclusion for AMFI-registered distributors and the rule against earning from both advice and distribution; Box 6.8.3 explains the exemption and the mis-selling definition. Appendix 3 (AMFI's Code of Conduct for Intermediaries of Mutual Funds) cites Regulation 3(3) on names and the segregation obligation, and Chapter 5 tells an investor who cannot research a scheme to consult an MFD or a registered investment adviser. Expect questions on who is excluded from the definition and which titles an MFD may not use.
Common exam traps
- Holding out is enough. Anyone who presents as an investment adviser, by whatever name called, falls within the definition.
- The MFD exclusion is conditional: AMFI registration, and advice only incidental to distribution.
- An MFD may not use adviser, advisor, wealth manager or consultant in its name unless SEBI-registered as an investment adviser.
- An investment adviser cannot take both fees and distribution commission.
- Suitability applies to the MFD too. Advisory or execution only, the distributor must still assess suitability; there is no third category.
- Chapter 6 still says an execution-only customer pays nothing beyond standard flat transaction charges, but its own footnote records that SEBI withdrew the transaction charges framework in August 2025. Treat that line as stale.
- The workbook names the regulations inconsistently (Investor Adviser Regulations, 2013 in Box 6.8.3). The instrument is the SEBI (Investment Advisers) Regulations, 2013.
Where this is taught
- Series V-A · Chapter 6: Fund Distribution and Channel Management Practicesintroduced here
- Series III-A · Chapter 19: SEBI (Investment Advisers) Regulations, 2013introduced here
- Series XIX-A · Chapter 5: Alternative Investment Fund Structuringintroduced here
- Series SEBI-ICE · Chapter 11: Caution against Ponzi Schemes and Unregistered Investment Advisersintroduced here
- Series X-A · Chapter 18: Key Regulationsintroduced here
Related terms
- Mis-sellingSelling securities or securities services by knowingly making a false statement, hiding material facts or risk, or not taking reasonable care that the product suits the buyer — an unfair trade practice.
- Direct and regular plansThe two routes into the same mutual fund scheme: a direct plan with no distributor and a lower expense ratio, and a regular plan that pays distributor commission — same portfolio, separate NAVs.
- AppropriatenessThe standard for advisory mutual fund sales: selling only the product identified as best suited for investors within a defined upper ceiling of risk appetite, with no exception made.
- AMFI Registration NumberThe registration number AMFI allots to a mutual fund distributor after NISM certification and KYD. It must be quoted on a client's Regular Plan transaction for commission to be paid.
- Execution onlyA mutual fund transaction not booked as advisory. If the distributor believes it is not appropriate, it needs a written unsuitability notice acknowledged by the investor and the investor's prior written confirmation.
- Mutual fund distributorThe intermediary who assesses an investor's goals and resources and matches them to suitable schemes — distinct from the fund manager, who builds the portfolio from market analysis, not from the investor's situation.
- Registered Investment AdviserA SEBI-licensed professional who charges investors a fee for investment advice; since 2013 only an RIA may use the word "adviser" — distributors, brokers and insurance agents may not.
- Investment adviser depositThe deposit a SEBI-registered Investment Adviser must keep with a scheduled bank, marked as lien for a SEBI-recognised body, to pay dues from an arbitration or conciliation case against the adviser.
- Trading callsIntraday, ultra-short and non-personalised buy/sell recommendations — defined so precisely that SEBI's rules say they do not count as investment advice at all.
- Wraps and platformsTechnology platforms offering standardised model portfolios that investors or their advisers can execute directly, sharing a fee between the platform and the adviser who uses it.
- Investor Charter for Investment AdvisersSEBI's charter for investment advisers, issued by circular dated 2 June 2025: the investor's rights and responsibilities, a list of dos and don'ts, and monthly public disclosure of complaint data.
- Part-time investment adviserAn individual or firm registered with SEBI to give investment advice for consideration while also carrying on another business activity or employment — capped at 75 clients in total.
- SuitabilityThe investment adviser's obligation under Regulation 17 to ensure that every piece of advice fits the client's documented risk profile, investment objectives and capacity to absorb loss.
- Persons associated with investment adviceAny member, partner, officer, director, employee or sales staff of an investment adviser who is engaged in providing investment advisory services to the adviser's clients.
- Third Schedule Code of ConductThe 9-head code of conduct in the Third Schedule to the SEBI (Investment Advisers) Regulations, 2013, which every Investment Adviser must follow at all times.
- Investment adviceAdvice on buying, selling or dealing in securities or investment products, including financial planning. Only a SEBI-registered Investment Adviser may give it for a fee; mass-media commentary is excluded.
- Portfolio managerA body corporate registered with SEBI that, under a contract with a client, advises on or manages that client's securities or funds — discretionary, non-discretionary or advisory.
- KYC Registration AgencyA SEBI-created agency that holds an investor's verified KYC record centrally, so that one KYC completed with any securities market intermediary works with all the others.
- Principal officerThe named individual at a non-individual intermediary who carries personal regulatory responsibility for the advisory business, and who must personally hold the prescribed qualification and NISM certification.
- Client level segregationThe SEBI rule that no single client may receive both advisory and distribution services from the same investment adviser group — each client is one or the other, never both.
- Fee-only adviserAn investment adviser who earns income from fees paid by the client — not commissions from product providers — and typically does not execute the transactions advised.
- Implementation servicesThe execution of an Investment Adviser's recommendations in the securities market, which the adviser may offer to a client but only through direct schemes and without charging any fee or commission for it.
- In-principle registrationThe three-month transitional registration an individual Investment Adviser must apply for on crossing 300 clients or Rs 3 crore of annual fees, while converting to a non-individual adviser.