SEBI’s proposed fee collection portal for advisors invites mix response

According to a different SEBI consultation document, registered firms or intermediaries should not work with unregistered finfluencers to advertise or promote their services.

The Securities and Exchange Board of India (SEBI) wants to develop a closed ecosystem where clients’ fees can be collected by certified investment advisors and research analysts. This will make it easier for investors to spot and steer clear of unregistered firms.

This is a part of SEBI’s larger effort to safeguard investors from finfluencers and other unregistered entities that might mislead or take advantage of them.


According to a different SEBI consultation document, registered firms or intermediaries should not work with unregistered finfluencers to advertise or promote their services.

According to SEBI regulations, clients that pay investment advisors (IAs) fees must do so in a way that demonstrates the funds’ traceability. Cash payments for fees are not permitted. The same is true for research analysts (RAs), who demand payment for the services they provide.

Numerous unregistered entities have deceived investors throughout the years in violation of IA and RA requirements. The regulator believes that it is necessary to aggressively limit their rise.

Clients must pay fees on selected platforms that are specified by a SEBI-recognized regulatory authority, according to SEBI’s consultation document on the proposed escrow-based approach.

The specifics of the selected bank accounts where fees will be received will be provided by IAs or RAs.

The only purpose of these designated bank accounts would be to receive fees from investment advice and research activities.

“SEBI is in favor of developing a transparent framework for all investors and registered entities. One such mechanism to safeguard investment interests is this. Investors will have more confidence as a result of the system. The key to the new planned mechanism’s success, according to Priyadarshini Mulye, founder of ARTHA FinPlan and a SEBI-registered financial advisor, will be awareness.

Investors may not like SEBI’s proposal that any payments made outside the designated system will not be deemed payments for investment advice or research services. As a result, SEBI or a recognized regulatory authority will not take complaints in this regard.

“SEBI is undoubtedly investigating a wide range of fininfluencer-related concerns and wants to confirm that the client is paying the licensed advisor directly. However, it’s still the same general query. The regulated are still being regulated. What about those who lack authority? Who is going to listen to those people who are paying outside the system and are taken advantage of? asked Kalpesh N. Ashar, the founder of Full Circle Financial Planners and Advisors and a SEBI-registered investment advisor.

According to experts, the consultation paper does not adequately address the problem of the general public’s continued ignorance of registered advisors or even SEBI. There are worries that many people would still fall for it if an unregistered organization or a con artist phones an investment and promises 30-35-40 percent profits.

“It is crystal evident that SEBI is handling the situation on their own. From the perspective of SEBI, it is quite convenient to state that we will not consider your complaint if you do not use this payment channel. Suresh Sadagopan, a Principal Officer of Ladder7 Wealth Planners Pvt. Ltd. and a SEBI-registered financial advisor, declared that it was undoubtedly not helpful to investors.

New investors currently scarcely have a way to distinguish between paying registered firms for investing advice and research services or neither.

Some experts believe that the lack of a redressal option in the event that you pay your adviser outside of the intended filtration method may serve as an incentive for investors to solely use registered IAs or RAs for advice or services.

The regulator ordered earlier this year that IAs obtain prior regulatory body approval before engaging in any internal or external communications with current or potential clients.

IAs’ ability to supply services to their clients has been delayed as a result, which has increased their costs. For each application that is approved, individual advisors, for instance, must pay processing fees of Rs 3,000. In some circumstances, it may take weeks to receive the regulatory body’s permission.

SEBI is looking for feedback from interested parties on the paper through September 15 and is asking for their thoughts on whether the proposed fee collection system for IAs and RAs should be either optional or mandatory.

The proposed new SEBI mechanism for RIAs to collect their fees would require a significant advertising campaign to inform investors of the proper (and possibly only) method of paying their financial advisors, according to experts, if it were to be enacted and made mandatory. They claim it will be along the lines of “Mutual Fund Sahi Hai” by the Association of Mutual Funds of India (AMFI; the trade association for the mutual fund sector).