SEBI is looking for feedback on a new system for collecting fees from investment advisers and research analysts.

The Securities and Exchange Board of India (SEBI) has published a consultation paper describing a proposal for a closed environment for fee collection by SEBI licence Investment Advisers (IAs) and Research Analysts (RAs) from their customers.

The aim is to assist investors in identifying, isolating, and avoiding unregistered businesses and to make sure that payments are only going to registered IAs and RAs.

Clients pay fees on authorized platforms that were determined or controlled by a SEBI certified supervisory organization under the proposed method.

The specified bank account(s) in which fees be paid using the suggested technique would be disclosed by IAs/RAs. The only purpose of these bank accounts would be to collect fees from investing advising and research work.

A working group made up of officials from the BSE, BSE Administration & Supervision Limited (BASL), and the Association of Registered Investment Advisers (ARIA) developed the suggested system based on their suggestions.

The consultation paper’s Annexure A covers key details and includes a process flow diagram that illustrates the proposed approach.

SEBI is looking for feedback on the following topics

• Whether the proposed fee collecting system for RAs and IAs should be required or voluntary.
• Whether any additional information needs to be captured in the proposed mechanism for fee collection to make it more efficient and user-friendly
• Whether the development and awareness of the proposed mechanism of fee collection will make investors more cautious in approaching unregistered entities for availing Investment Advisory/Research Services.

Email to be sent 

By September 15, 2023, comments may be sent through email to consultationMIRSD@sebidotgovdotin in the manner outlined in the consultation document.

Identification as Registered intermediaries

To ensure their identification as registered intermediaries and set them apart from unregistered firms, SEBI is taking action to establish a distinct ecosystem for fee collection by IAs and RAs.

The proposed mechanism is intended to give investors clarity regarding the entity’s registration status, give them peace of mind that fees are going to a SEBI registered IA or RA, and encourage them to only contact registered IAs or RAs for all of their investment advisory and research service needs.

The Securities and Exchange Board of India (SEBI), which is actively soliciting comments, has introduced a new system for charging investment advisors and research analysts fees.

The goal is to implement a method that increases transparency and simplifies the fee collecting procedure.

According to the new system, research analysts and investment counsellors must directly bill customers for their services. Clients will have complete information of the costs they are paying for and there won’t be any chance of conflicts of interest.

According to SEBI, the new method would enable investors to make wise investment choices and advance fairness and transparency in the financial sector.

Stakeholders may provide their opinions and recommendations about the suggested fee collecting system. To resolve any issues or difficulties that surface during implementation, SEBI will make use of the comments.

The new fee collecting system is in line with SEBI’s continuing efforts to tighten rules for research analysts and investment advisors. Increased investor protection and maintaining market integrity are the two main objectives of direct fee collection.

The new system is anticipated to have a favourable impact on the investment advice and research analyst industries, encouraging more responsibility and openness.

The costs related to investing advising and research services will be clear to investors.

In order to increase investor trust in the Indian securities market, SEBI has been aggressively working. A further step towards developing a fair, effective, and open financial ecosystem is the planned fee collecting system.

Research analysts, industry stakeholders, and investment advisors are all invited to engage by sharing their ideas. This coordinated effort will guarantee that the new fee collecting system is strong and efficient in accomplishing its intended objectives.

In conclusion

SEBI’s plan to provide investment advisors and research analysts an active fee collecting system is an important step towards increasing transparency and advancing investor safety. It is admirable that the regulator is working to improve accountability and the regulatory framework. Industry stakeholders are encouraged to provide their ideas and recommendations to help develop this crucial endeavour.