Imagine signing up for investment advice expecting professional guidance, only to later discover that the payment arrangement may not align with what regulations generally allow for registered advisers.
That is where many investor concerns begin.
In the case of Aurostar Investment Advisory, arbitration records raise questions around one recurring issue: profit-sharing arrangements between an investment adviser and clients.
Documents reviewed in the arbitral proceedings discuss how fees linked to profits or portfolio gains became a central point of dispute.
Before jumping to conclusions, it helps to understand one important thing: disputes involving SEBI-registered entities are not always about whether advice was good or bad.
Often, the issue is whether the adviser’s business practices stayed within the boundaries set by regulation.
This blog reviews what the arbitration materials say, what profit-sharing rules generally mean for investment advisers, and what investors can learn from such cases.
Aurostar Investment Advisor Review
Aurostar Investment Advisory Private Limited is a SEBI-registered investment advisory firm operating under the proprietorship of Umesh Kumar Pandey.
The firm offers stock market trading tips, commodity market advisory on MCX and NCDEX, futures and options strategies, and investment planning services.
Like many advisory firms in India, Aurostar reaches potential clients through digital marketing, phone calls, and online advertisements.
On paper, it operates within a regulatory framework, which is precisely why its conduct in the case described below is worth examining carefully.
Beyond the arbitration case, the firm has a documented history of unresolved investor grievances on SEBI’s SCORES platform.
Aurostar Investment Advisory Arbitration
The arbitration case contains important observations related to the dispute. The conflict involved client grievances connected to advisory payments and related financial arrangements.
Based on the award, the dispute appears to include concerns around:
1. Profit-linked compensation structure
A central issue discussed is the existence of payment expectations or fee structures connected to client profits or returns. This became a major point of contention during arbitration.
Why is this significant?
Because when advisory compensation depends on gains, it changes the nature of the adviser-client relationship.
Instead of purely advising, the adviser may become financially interested in outcome-based decisions.
That creates obvious tension.
2. Client grievance over losses and payments
SEBI requires investment advisors to assess a client’s financial situation, risk appetite, and capacity before giving any advice.
Aurostar skipped this step entirely. Notably, the firm’s own representative admitted during the arbitration hearing that this was a violation.
The investor’s actual risk capacity was found to be only ₹1-3 lakh, a fact that should have been the starting point of any advisory engagement.
3. Demanding illegal extra payments
The contract between the investor and Aurostar capped the annual advisory fee at ₹1,47,500. After collecting this fee, Aurostar demanded an additional ₹5 lakh in cash.
The firm also instructed the investor to make this payment from his wife’s account to avoid detection.
Demanding fees beyond those agreed in the contract, and directing payment in a way designed to conceal it, goes beyond a service dispute and raises questions of basic financial conduct.
4. Misleading communication practices
Aurostar’s welcome letter to the investor stated that all investment advice would only be delivered via SMS.
In practice, all communication, including actual trading recommendations, was delivered through phone calls and WhatsApp.
The arbitrator held the firm fully responsible for the actions of its employees, including communications made through channels that the firm’s own onboarding documents said would not be used.
What was Aurostar Ordered to Pay?
The final arbitral award in the matter records a monetary direction against the respondent, with the applicant being awarded compensation and refund-related amounts.
The order is specific and quantifies both trading loss compensation and service charge refund.
According to the award, the respondent has been directed to pay: Rs. 14,10,000 as compensation for losses suffered by the applicant.
This amount appears to represent the principal compensation component considered appropriate by the arbitrator after reviewing the dispute materials and submissions from both parties.
The wording of the order directly links this amount to “compensation for loss suffered by the Applicant.”
This is significant because arbitration awards do not automatically grant loss recovery merely because losses occurred.
A compensation direction generally follows examination of the facts, documents, claims, and contractual issues presented during proceedings.
Refund of service charges was also ordered.
In addition to loss compensation, the award separately directs payment of: Rs. 1,47,000 as a refund of service charges.
This indicates that the arbitrator did not limit the matter only to trading losses or damages, but also considered fees already collected under the advisory arrangement.
When service fees are also ordered to be refunded, it often suggests that the fee arrangement itself became part of the dispute and was examined independently.
In advisory disputes involving profit-sharing or performance-linked fees, fee recovery frequently becomes a major area of contention.
The award also imposes interest obligations.
The respondent is directed to pay interest at 15% per annum from 07-Aug-2024 till the date of the award
This means the awarded amount continues to carry interest for the relevant period before compliance.
Is Profit Sharing Legal for Investment Advisor India?
This is one of the most commonly misunderstood areas of investment advisory regulation in India, and it matters enormously in the Aurostar case.
You need to check the SEBI IA regulation to understand the query – can an Investment Advisor share in profits?
SEBI’s Investment Adviser Regulations, 2013, are clear on this. An investment advisor cannot promise, assure, or guarantee any specific return on investments. They cannot enter into profit-sharing arrangements with clients.
They cannot use performance claims, real or fabricated, to induce investors to purchase their services.
This rule exists to protect retail investors from being lured into high-risk situations on the basis of promises that no advisor can legitimately keep.
The stock market, by definition, involves risk. Any advisor claiming certainty is either mistaken or misleading.
In the Aurostar case, the firm’s representatives allegedly promised high profits and assured the investor of returns before recommending trades. This sits at the centre of the violations the arbitrator found.
What Investors Can Keep in Mind?
The Aurostar case is a useful reference point for anyone dealing with investment advisory services, registered or otherwise.
- SEBI registration confirms a firm exists within a regulatory framework. It does not guarantee ethical conduct or service quality.
- Any advisor, verbal, written, or over WhatsApp, who promises specific returns or profit sharing violates SEBI IA Regulations 2013.
- Before engaging any advisor, ask for your risk profiling assessment in writing. It is your right under the regulation, not a favour.
- Any fees demanded beyond what is documented in the signed agreement are outside the legal scope of the engagement.
- Save all communication, calls, WhatsApp, emails, and SMS. This documentation becomes the evidence in any formal dispute.
- An advisor who urges you to “average down” on a losing trade and then asks for more money to “recover” those losses is applying financial pressure, not providing advisory services.
- SEBI’s SCORES platform tracks unresolved complaints. Checking a firm’s name there before engaging is a straightforward due diligence step.
How to File a Complaint Against RIA?
If you have had an experience with an investment advisory firm that raises the kinds of concerns documented in the Aurostar case, here is the process for formally escalating it.
1. Document everything first
Gather all evidence before doing anything else. Screenshots of conversations, payment receipts, any written promises, contract documents, SMS messages, WhatsApp chats, and records of calls. Strong documentation is the foundation of any complaint
2. Write to the advisory firm directly
Send a formal written complaint by email stating your grievance clearly, the resolution you are seeking, and attaching all supporting documents. Keep a dated record of this communication and any response received.
3. Lodge Complaint in SCORES
Visit the SCORES platform to file a formal complaint. You will need your PAN, the firm’s registration number, a description of the grievance, and supporting documents.
Once filed, the complaint is formally routed to the firm, which must respond within a prescribed timeframe.
4. Escalate the issue in SMART ODR
SEBI’s Smart ODR (Online Dispute Resolution) system offers a faster, structured route for resolving disputes with registered market intermediaries.
It is particularly useful when direct communication with the firm has not produced results.
5. Stock Market Arbitration
As the Aurostar case demonstrates, formal arbitration proceedings are available when SCORES or direct resolution does not lead to a satisfactory outcome.
The arbitration process creates a legally binding ruling and can result in directed compensation, including interest and cost recovery.
Need Help?
Filing a complaint against a SEBI-registered firm can feel counterintuitive.
If you are unsure how to draft your complaint or navigate the SCORES process, you do not have to figure it all out alone.
Register with us. Our expert team will guide you thorugh the process.
If an investor is considering escalation, preparing the paperwork early saves time later.
Conclusion
The Aurostar Investment Advisory arbitration case is significant not because it is unique, but because it is documented. Seven violations were identified, a ruling was issued, and ₹15.57 lakh in compensation was directed to the investor.
The profit-sharing promise, the assurance that the firm could deliver consistent, guaranteed returns, sits at the heart of what went wrong.
It is the oldest and most persistent pattern in investment advisory misconduct, and it is one that SEBI regulations specifically exist to prevent.
Registration is a starting point for due diligence, not the end of it.
Before engaging any investment advisor, check their SCORES complaint history, insist on written risk profiling, read the fee agreement in full, and treat any promise of guaranteed returns as a signal to walk away, regardless of how confident the pitch sounds.
If something has already gone wrong, the Aurostar case is proof that formal channels exist and that they work.
