Market regulator Sebi mulls new fee collection system for advisors

The Securities and Exchange Board of India (Sebi) has proposed the establishment of a new fee-collection mechanism for investment advisors (IA) and research analysts (RA). This initiative aims to crack down on unregistered IAs and RAs that may mislead investors.

"This ecosystem will assist investors in ensuring that their payments reach only registered IAs and RAs. Consequently, this will also enable investors to identify, isolate, and avoid unregistered entities, who will be unable to access this closed ecosystem," Sebi stated in a consultation paper on Friday.

Under this proposed mechanism, all fees paid by clients will be processed on a designated platform and directed to a Sebi-recognised supervisory body. The system will accommodate payments either through online modes via a payment link or through options like NEFT, RTGS, IMPS, and cheque via a virtual account number. The supervisory body will then transfer the fee to the designated account of the RIA or RA.

Investors will be notified that “Any payment made outside the specified mechanism will not be considered as payment towards investment advisory or research services under Sebi (Investment Advisers) Regulations, 2013/ Sebi (Research Analysts) Regulations, 2014, and no grievances in this regard will be entertained by the Sebi-recognised regulatory body or Sebi,” as stated by the regulator in the paper, inviting feedback until September 15.

The new payment mechanism will become an integral part of client agreements, and will also include a disclosure that "all fee payments made by the client for investment advisory or research services by the investment advisor or research analyst must be made through the Sebi-specified mechanism for fee collection."