SEBI Mandates Investment Advisors To Accept Only Fees, Not Funds Or Securities
The market regulator issued a separate circular for research analysts, barring them from executing any trade on behalf of the client.
The Securities and Exchange Board of India on Monday came out with two circulars mentioning the "most important terms and conditions" to be followed by research analysts and investment advisors, in order to strengthen investor protection.
The circular mentions that the investment advisors can only accept fees from clients and not handle their funds or securities. For research analysts, the market regulator stated that they are barred from executing any trade on behalf of the client.
Additionally, the IAs and RAs cannot give guarantee for future returns or promote assured return schemes.
They will need to disclose those of their services which are beyond the scrutiny of the market regulator. It has been further mentioned that IAs executing trades would require explicit consent from the client and there will be strong prohibition of client login credentials.
Both the circulars have been formulated by the Industry Standards Forum in consultation with SEBI and the respective supervisory bodies of RAs and IAs.
Existing clients must be informed about SEBI's terms and conditions by June 30, 2025, via email or any other recordable mode. For new agreements, IAs must include the regulatory terms and obtain client consent. The circulars are effective immediately.
The circulars further mention that the IAs and the RAs must stick to the regulator's guidelines on conflict of interest and inform their clients of any such issues. Furthermore, their clients can escalate the issues faced by them from the internal grievance mechanism of the RAs and IAs to SEBI's SCORES platform and smart online dispute resolution services if required.
Finally, the IA can charge the maximum fees prescribed by SEBI, which is currently capped at Rs. 1.51 lakh per annum per client family. The limit remains same for the RAs as well. However in case of the investment advisors, 2.5% of asset under advise can also be charged as fee in place of the maximum permissible limit.
