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Sebi proposes cap on investment adviser fees, client segregation, says report

Updated : January 17, 2020 11:33 AM IST

Sebi is considering capping investment advisory fees to 2.5 percent of the assets under advice (AuA) or a flat fee of Rs 75,000 per year, according to a report.

The regulator has also proposed client segregation rather than business segregation for entities acting as both advisers and distributors, said the report.

Market regulator Securities and Exchange Board of India (Sebi) is considering capping investment advisory fees to 2.5 percent of the assets under advice (AuA) or a flat fee of Rs 75,000 per year, according to a Mint report.

The regulator has also proposed client segregation rather than business segregation for entities acting as both advisers and distributors, said the report.

The proposals were part of a consultation paper on Sebi-registered financial advisers (RIAs) that the market regulator unveiled on 15 January, it added

The paper noted that there have been numerous complaints from customers about investment advisers offering assured returns, charging exorbitant fees and mis-selling products, as per the report.

Under the existing rules, individual advisers cannot offer both distribution and advisory services, but corporate entities can offer both the services through separate departments, the report said.

Sebi’s consultation paper proposes that neither individual advisers nor corporate entities can offer both distribution and advisory services to the same client, according to the report.

Existing clients who pay both distribution commissions and advisory fees will get the right to choose between the two service models, the report said.

Under the current rules, investment advisers are not allowed to provide distribution services, while Sebi has proposed that they be allowed to do so but without charging customers, the report added.

Sebi proposes cap on investment adviser fees, client segregation, says report

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