Market regulator Sebi on Friday announced rolling out a new system -- Centralised Fee Collection Mechanism -- to facilitate collection of fees by Investment Advisers (IAs) and Research Analysts (RAs) from their clients on an optional basis.
Under this mechanism, clients will pay fees to IAs/RAs, through a designated platform or portal administered by a recognised Administration and Supervisory Body (ASB), the regulator said in a circular. “In the proposed mechanism, fees shall be paid by clients through a designated platform to be administered by SEBI recognized supervisory body,”as per SEBI.
Need For Greater Transparency in Fee Payment
The move came in response to the growing interest in the securities market and the need for greater transparency in fee payments. The market regulator said in a statement, “It has been noted from the various complaints received by SEBI and enforcement orders passed by SEBI that many unregistered entities have mislead the investors by holding themselves out as registered IAs and RAs.”
Further, the regulator highlighted that these unregistered entities attract investors by offering unrealistic returns, promoting "get rich quick" schemes, and providing investment advice and research analysis services without adhering to KYC and other compliance measures. These measures are mandatory for registered investment advisors (IAs) and research analysts (RAs). The markets regulator said that BSE would specify the operational framework for the mechanism on or before September 23 and make the mechanism operational from October 1. The mechanism has been co-created by BSE Ltd with the help of various stakeholders. While using this mechanism is optional, Sebi asked ASB to take steps to encourage clients and the registered IAs and RAs to avail the services of this mechanism. Further, registered IAs and RAs will encourage their clients to use this mechanism, it added. As per SEBI, the advantage of having a separate mechanism for fee collection includes clarity to investors, giving due recognition to registered IAs and RAs which will help them distinguish from unregistered entities and more.
(With inputs from PTI)
