Unit study guide · NISM Series III-A
SEBI (Investment Advisers) Regulations, 2013
3 questions in this unit
What this unit covers
- In what capacity must a registered investment adviser act towards its clients under the general responsibility provisions?
- A client loses stable income and now needs invested money within six months. What should the adviser do before giving further advice?
- A client says they enjoy high risk but cannot absorb a material loss and need the money soon. Which approach best meets suitability requirements?
Key ideas
From the practice bank · 1
In what capacity must a registered investment adviser act towards its clients under the general responsibility provisions?
An investment adviser must act in a fiduciary capacity, placing the client relationship under duties of trust and proper conduct. Remember: An investment adviser’s role carries a fiduciary responsibility to the client.
Hint Common mistake: Treating advice as ordinary product selling without client-centred duties. Recall the duty arising from a relationship of trust with the client.
III-A-133From the practice bank · 2
A client loses stable income and now needs invested money within six months. What should the adviser do before giving further advice?
The adviser should update the risk assessment and reassess whether further advice is suitable for the changed circumstances. Remember: Risk profiling and suitability are continuing duties rather than one-time forms.
Hint Common mistake: Relying on an old profile after the client’s financial circumstances change. Identify whether the client’s capacity, needs or time horizon have changed.
III-A-134From the practice bank · 3
A client says they enjoy high risk but cannot absorb a material loss and need the money soon. Which approach best meets suitability requirements?
The adviser must consider capacity, needs and horizon alongside willingness when assessing suitability. Remember: Risk appetite and loss-bearing capacity are different inputs to suitability.
Hint Common mistake: Equating enthusiasm for high returns with financial ability to take high risk. Separate willingness to take risk from the ability to bear it.
III-A-135