SEBI intends to strengthen the regulatory framework for Investment Advisers

Author: thinkinglegal | February 29, 2020 - 10:47 | Tags: Regulatory Advisory

On 15 January 2020, SEBI issued a Consultation Paper on “Review of Regulatory Framework for Investment Advisers (“IA”)” inviting comments on various proposals including:

1. Cap on IAs fees: In order to curb the issue of mis-selling and overcharging of fees by IAs from clients in the capital market, SEBI has proposed that IAs should charge fees having either a cap of 2.50% on fees based on AUA (Assets Under Advisory), or a fixed fee cap of Rs. 75,000 annually per family across all products and services. Further, SEBI has proposed that IAs can only collect advance fees for up to two quarters.

2. Client Level Segregation: SEBI has further proposed that IAs can offer both advisory and distribution services provided they have client level segregation and not business level segregation i.e. IAs cannot offer both services to the same client at the family level (spouse, dependent children and dependent parents).

3. Higher Net Worth Requirements: SEBI has suggested that net-worth requirement for individual IAs should increase from Rs. 1 lakh to Rs. 10 lakhs, and from Rs. 25 lakhs to Rs. 50 lakhs for non-individuals IAs.

This post has been contributed by Ms. Vaneesa Agrawal and Mr. Rishi Ahuja.

[DISCLAIMER:  This article is for academic purpose and is solely to provide readers with general information regarding developments in Indian law. The information contained herein does not constitute legal or a professional advice.]