Ethics, conflicts of interest, grievance redressal and compliance
Ethical core
The adviser's code of conduct runs on honesty, fairness, transparency, due diligence, confidentiality and priority of the client's interest over the firm's. Conflicts must be identified, disclosed and managed - never hidden. Classic conflicts: commission from product providers, proprietary holdings in recommended securities, incentives for pushing a particular AMC, referral arrangements, and principal trading. Front-running client orders, trading on unpublished price-sensitive information, misrepresenting credentials, and churning a portfolio to earn fees are violations under the IA Regulations, the PFUTP Regulations and the Insider Trading Regulations.
Grievance redressal ladder
A complaint first goes to the adviser's own redressal mechanism, within the timeline stated in the investor charter and the agreement. If unresolved, the investor escalates to SEBI SCORES (the centralised complaints portal). Unresolved disputes then move to the SEBI Online Dispute Resolution (ODR) portal, which offers conciliation and arbitration through authorised institutions, and finally to arbitration/awards enforceable under law. Advisers must display their SEBI registration number, the SCORES/ODR route, and the compliance officer's contact on their website and in client communications.
Compliance machinery
Non-individual advisers need a designated compliance officer, an annual compliance audit reported to SEBI, a conflict-of-interest policy, an advertisement review process, and record retention for the prescribed period. Individual advisers carry the same substantive duties without the corporate apparatus.
Traps
- Telling a client to "go to SEBI" as a first step; SCORES is an escalation, not the first forum.
- Forgetting that an adviser must disclose own holdings in a recommended security.
- Assuming verbal disclosure of a conflict suffices - it must be recorded.
Rule of thumb
"If it would look bad in the client's file, disclose it in writing before you act."