SEBI introduces optional fee collection mechanism for investment advisers and research analysts

SEBI

To ensure that investors know they are dealing with registered investment advisors (RIA), the capital market regulator, Securities and Exchange Board of India (SEBI) launched a special mechanism for RIA to collect fees from their clients.

Introducing Safe Space

Called the safe space, this would be a website that would collect fees from you- the client- and then pass them on to your advisor. The idea is to give an assurance to you that if your investment advisor is listed on this website (to be able to collect fees from you), then s/he is a genuine (registered) advisor. SEBI has also extended this facility for research analysts as well.

This mechanism ensures investors interact with registered entities, increasing trust and transparency. By channeling fee payments exclusively to registered investment advisers and analysts, the proposal seeks to clearly distinguish between registered and unregistered entities, fostering a more trustworthy environment for investors.

Investors will not need to pay any fees for using this facility, ensuring no additional financial burden on investors. RIAs would have to pay a minimal charge of Rs 4,000 per year for using this facility. Aside from BSE Administration and Supervision Limited (BASL), a wholly-owned subsidiary- and SEBI approved- of BSE that oversees investment advisers, SEBI has said that Mutual Funds Utility would also be allowed to set up this mechanism. Your financial advisor can choose one of these platforms to use to collect fees from you.

An optional mechanism

SEBI has said that this fee collection mechanism is an optional one. Unlike what was heard earlier that SEBI might make it mandatory to all RIAs to come on board this mechanism, SEBI has made this optional. "It would be in the interest of registered advisors to come onboard this platform. This proves their genuineness and proves their authenticity," said Madhabi Puri Buch, Chairperson, SEBI.

SEBI comes down on finfluencers

This measure is in addition to the stricture that SEBI issued on Thursday that brokers and mutual funds should stop using unregulated financial influencers for marketing and advertising campaigns.

SEBI said financial influencers engaged in investor education will be exempt from the new restrictions.

The decision was taken to address concerns related to "certain persons, including unregulated entities, inducing investors to deal in securities based on inappropriate claims", SEBI said in a press statement issued after a board meeting.