SEBI’s clarification on commission and referral fees for IA (SEBI’s Informal Guidelines)
A lot of registered Investment Advisers (IA) are writing to SEBI off let, to seek their guidance and interpretation on various clauses of SEBI (Investment Adviser) Regulations, 2013 (IA Regulation). With the new amended IA Regulations, there are lot of ambiguity and lack of clarity on how to interpret the regulation. Though, SEBI has made the best effort to put all of it in a simpler way, still there are grounds for different interpretation of the IA Regulation.
One such registered IA, iFast Financial India Private Limited (IFast) had recently written to SEBI seeking their guidance with respect to remuneration, referral fees or commission etc. to be charged. It has further requested SEBI to clarify on the eligibility criteria for Foreign Citizens to provide investment advisory services and qualification and certification requirements to be registered with SEBI.
Here is the detailed summary of the informal guidelines sought by iFast and SEBI’s response to it:
SEBI by this informal guideline has made it clear, what they are expecting and how the regulation should be interpreted.
With regard to the referral fees, implementation charges, SEBI have specified that where IAs are providing advisory services and charging fees for such services, it shall not take any referral fees or implementation charges. An IA can provide implementation services to its advisory clients only through direct schemes/ products in the securities market but cannot charge for such services to its clients.
The foreign citizens and NRIs who wish to provide investment advisory services to its clients based out of India shall not be required to obtain SEBI license. However, where the investment advisory is being provided to people based in India, SEBI license becomes mandatory.
Further, to conclude SEBI has clarified that in order to apply for SEBI license once must have post graduation degree or post graduation diploma of minimum 2 years duration. In case, where someone does not fulfill these criteria, he/ she will not qualify for SEBI license under IA Regulation.
Hope this article will help you to be on the right side of the regulation. In case of queries, please write to me at firstname.lastname@example.org or reach out to me at +91 9148973085.