Investment advisers cannot charge implementation fee for advisory clients: Sebi

NEW DELHI: Investment advisers can provide execution providers for their advisory clients however with out charging any fee or charges, markets regulator Sebi mentioned.

It additional mentioned an funding adviser cannot avail reimbursement of any quantity for the providers given to its purchasers from the asset administration corporations (AMCs) whose direct plans are being offered by it to purchasers.

The clarifications have been given as a part of an off-the-cuff steering sought by Paytm Money Ltd (

) relating to Sebi’s funding advisers (IA) norm.

PML mentioned at present it doesn’t charge advisory or execution charges and intends to avail of reimbursement of the service-related out of pocket bills comparable to KYC, expertise internet hosting, platform upkeep and so on from AMCs whose direct plans it’s promoting. This is as a result of PML is bearing the associated fee that the AMC would have borne in case the investments have been instantly routed by way of them.

It has requested Sebi to make clear whether or not availing such reimbursement from AMCs is in violation of the funding advisers norm.

In its reply made public on Monday, the Securities and Exchange Board of India (Sebi) mentioned that an funding adviser could present implementation providers to the purchasers in securities market.

This is topic to the situation that “investment advisers shall ensure that no consideration including any commission or referral fees, whether embedded or indirect or otherwise, by whatever name called is received, directly or indirectly, at investment adviser’s group or family level for the said service, as the case may be”.

It additional mentioned such implementation providers have to be offered solely by way of direct schemes or merchandise within the securities market.

Also, the consumer want to not be underneath any obligation to avail implementation providers supplied by the funding adviser.

The Sebi guidelines limit a registered IA or its group of household to charge any implementation charges from its purchasers, the regulator mentioned.

In view of this, Sebi mentioned “PML cannot avail reimbursement of any amount for the services given to its clients from the AMCs whose direct plans are being sold by them to clients”.

As per the regulator, an funding adviser shouldn’t render any funding recommendation till consent is obtained from its purchasers on the phrases and circumstances.

Further, with a view to guarantee enforceability, an settlement was mandated between IA and the consumer incorporating the phrases and circumstances within the doc as specified by Sebi.

“…merely seeking an electronic consent and sharing the same with the clients on their registered email address may not be considered as sufficient compliance with IA regulations,” the regulator famous.

With regard to Principal Officer, Sebi mentioned a member of the committee (together with a division head in charge of advisory enterprise) appointed by the board of IA to supervise the advisory features and operations cannot be the Principal Officer of the IA, except he’s additionally the managing director or government chairman of the board or equal administration physique of the IA.

Noting this place is predicated on the knowledge furnished, Sebi mentioned “different facts or conditions might lead to a different interpretation”.

“This letter does not express a decision of the board on the question referred,” the regulator added.