Sebi provides clarity on investment adviser regulations

Source: The Hitavada      Date: 24 Dec 2016 09:18:06


Dec 23,


REGISTERED investment advisers can charge “fair and reasonable” fee for their services but current regulations do not envisage variable payments on the basis of a particular client’s profits or losses, according to Sebi. “An investment adviser advising a client may charge fees, subject to any ceiling as may be specified by the Board, if any. The investment adviser shall ensure that fee charged to the clients is fair and reasonable,” the regulator said.

The Securities and Exchange Board of India (Sebi) has given this view on an application filed by MarketMagnify Investment Adviser seeking informal guidance in the matter. On a query whether it is compulsory to enter into an agreement in writing or mentioning the terms in email would be sufficient in case of variable fees charged on post profit model, the watchdog said the investment adviser should disclose all the material information including terms and conditions on which it offers advisory services.

Entering into an agreement with the client was not necessary, Sebi said, adding that however, investment advisers were required to maintain copies of agreements with the clients, if any.

MarketMagnify Investment Adviser had sought an interpretative letter asking whether it can charge variable fees and whether an adviser would be responsible to make good losses incurred by the client in case of fixed fee, assuming that such losses are not caused due to negligence of the adviser but due to inherent market risk.