SEBI Board Meeting: Investment Advisers, Research Analysts Allowed To Charge Advance Fees For Up To A Year

The Securities and Exchange Board of India on Monday decided to allow investment advisers and research analysts to charge advance fees for up to one year.

Investment advisers can charge fees in advance for up to two quarters, while research analysts can do so only for a quarter, as per current rules.

Investment advisers and research analysts regulations were earlier rationalised to address many concerns of the industry, said SEBI, adding that they have welcomed most changes. However, concerns remained on some of the fee-related provisions which restricted the collection of advanced fees by IAs and RAs to six months or three months fees.

"In order to address those concerns, the board has decided that if agreed by the client, investment advisers and research analysts may charge fees in advance up to a period of one year. Earlier, IAs and RAs were allowed to charge advance fees for a maximum period of two quarters and one quarter, respectively," SEBI Chairman Tuhin Kanta Pandey told reporters.

The compliance requirements related to fee limits, payment modes, refunds, and breakage fees will only be applicable to individual and Hindu Undivided Family clients, added Pandey.

In the case of non-individual clients, accredited investors, and in the case of institutional investors seeking recommendations of proxy advisers, fee-related terms and conditions will be governed through bilaterally negotiated contractual terms.

SEBI had initially introduced limits on advance fees to protect investors from being locked into long-term payments for services they may not find satisfactory.

To give a fillip to issuance of and trading in lesser rated debt securities, SEBI said that investments of Category II alternative investment funds in listed debt securities rated ‘A’ or below will be treated as akin to investments in unlisted securities for the purpose of their compliance with minimum investment conditions in unlisted securities.

Currently, Category II AIFs are required to hold a majority of their investments in unlisted securities. The recent changes to the SEBI Listing Obligations and Disclosure Requirements Regulations 2015 require that any entity that has issued listed debt securities can issue fresh debt only in listed form.

With these and other related changes, there is a likelihood that debt securities that could have been issued in unlisted form will now have to be listed.

The resultant drop in availability of unlisted debt securities can come in the way of AIFs complying with the minimum investment norms in unlisted securities, Sebi said. To address this, the SEBI board approved a proposal in this regard.

(With inputs from PTI).