Sebi Chairperson extracts promise from the 'good guys' to sign two petitions to Sebi

Madhabi Puri Buch

Sebi chairperson Madabi Puri Buch in a conference asked the Regulated Investment Advisers (RIA) to sign petitions saying they have no difficulty in implementing the proposal for a centralised fee collection portal and they are not opposed to furnishing data periodically.

At the Q&A session of the Association of Registered Investment Advisers conference, Buch was talking about how IAs get fees from profit sharing, referral income or selling other products which are not regulated by Sebi.

Harsh Roongta, head of Fee-Only Investment Advisors was talking about how the world has changed as RIAs have increasingly been collecting income only from clients when Buch asked the participants to sign a petition saying the RIAs who are not getting other income would have no difficulty in implementing the central fee collection mechanism.

“Everyone who raised hands saying they don’t get any income from any other products should sign the petition saying we support the central fee collection mechanism and give an undertaking that there is no other direct or indirect billing to the client", she said.

Earlier, Sebi put out a consultation paper with a proposal to set up a central fee collection mechanism through which client can pay fees to their IAs and RAs. The regulator proposed the mechanism in order to ensure clients are paying fees to a Sebi-registered entity and help clients identify registered entities as the mechanism won’t be available to unregistered entities.

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Roongta also asked the Sebi chairperson to bring segmented regulation for different market segments as it is difficult for a financial planner or a non-trading call provider to identify malpractices happening in a trading call. He called the common regulation for different segments, an ‘accident of history’.

Buch spoke about the difficulties in regulating different segments of the market and said it could be done in the future when account aggregator gets more advanced which will allow the regulator to monitor individual and joint bank accounts of RIAs in order to make sure that they are not doing illegal PMS (Portfolio Management Service)

“We are open to segmentation, but unfortunately haven’t reached that stage. In the future, if someone comes and says to Sebi that they need a regulation exclusively for them, Sebi can ask them to consent to monitor their bank account, and of their family members and registered entities so we can exactly know what is coming in and out”, Buch said.

Buch then asked the RIAs to sign the second petition where they wish the Sebi to bring a regulation which requires industry players to periodically submit granular data so that the richness of data can facilitate better policy-making.