The Securities Exchange Board of India (“SEBI”), in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 15(A) of SEBI (Investment Advisers) Regulations, 2013 (“IA Regulations”) and Regulation 15(A) of SEBI (Research Analysts) Regulations, 2014 (“RA Regulations”) vide Circular No. SEBI/HO/MIRSD/ MIRSD-PoD/P/CIR/2025/48,[1] dated April 02, 2025 (“Circular”) relaxed the provision of advance fee restrictions in the case of Investment Advisers (“IAs”) and Research Analysts (“RAs”).
The key highlights of the Circular are:
(a) In December 2024, SEBI introduced amendments to the RA Regulations. Following this, SEBI received representations from both RAs and IAs regarding the existing restrictions on advance fees. The current provisions allowed RAs to charge advance fees for a period of only 3 (three) months, while IAs were restricted to charging advance fees for only 2 (two) quarters. Both groups of professionals raised concerns that these short periods disincentivized long-term recommendations and advisory services.
(b) SEBI took note of the feedback from RAs and IAs, who expressed their desire for a more extended period for advance fee collection. As a result, SEBI issued a consultation paper proposing to extend the period of advance fee collection to 1 (one) year for both IAs and RAs.
(c) SEBI has now decided to relax these provisions and allow IAs and RAs to charge fees in advance, subject to the following updated guidelines:
- Advance Fee for One Year: If agreed by the client, IAs and RAs are now permitted to charge fees in advance for a period not exceeding 1 (one) year.
- Applicability to Individual Clients: The updated fee-related provisions (including advance fee, fee limit, payment modes, refund policies, and breakage fees) shall apply only to individual and Hindu Undivided Family (HUF) clients, provided these clients are not accredited investors.
- Exclusion of Non-Individual Clients, Accredited Investors, and Institutional Clients: These fee-related provisions shall not apply to non-individual clients, accredited investors, or institutional clients seeking recommendations from proxy advisers. In these cases, the fee terms and conditions shall be governed by bilaterally negotiated contractual terms.
(d) The Indian Association of Investment Advisers and Research Analysts (IAASB/ RAASB) at BSE Limited have been instructed, through this Circular, to notify the IAs and RAs regarding the updated provisions contained in this circular.
[1]https://www.sebi.gov.in/legal/circulars/apr-2025/relaxation-of-provision-of-advance-fee-restrictions-in-case-of-investment-advisers-and-research-analysts_93251.html