Investment advisers cannot charge implementation fee
Investment advisers can offer execution services for their advisory clients but without charging any commission or fees, markets regulator Sebi said.
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New Delhi: Investment advisers can offer execution services for their advisory clients but without charging any commission or fees, markets regulator Sebi said.
It further said an investment adviser cannot avail reimbursement of any amount for the services given to its clients from the asset management companies (AMCs) whose direct plans are being sold by it to clients. The clarifications have been given as part of an informal guidance sought by Paytm Money Ltd (PML) regarding Sebi's investment advisers (IA) norm.
PML said currently it does not charge advisory or execution fees and intends to avail of reimbursement of the service-related out of pocket expenses such as KYC, technology hosting, platform maintenance etc from AMCs whose direct plans it is selling. This is because PML is bearing the cost that the AMC would have borne in case the investments were directly routed through them.
It has asked Sebi to clarify whether availing such reimbursement from AMCs is in violation of the investment advisers' norm. In its reply made public on Monday, the Securities and Exchange Board of India (Sebi) said that an investment adviser may provide implementation services to the clients in securities market. This is subject to the condition that "investment advisers shall ensure that no consideration including any commission or referral fees, whether embedded or indirect or otherwise, by whatever name called is received, directly or indirectly, at investment adviser's group or family level for the said service, as the case may be".
It further said such implementation services need to be provided only through direct schemes or products in the securities market. Also, the client need not to be under any obligation to avail implementation services offered by the investment adviser. The Sebi rules restrict a registered IA or its group of family to charge any implementation fees from its clients, the regulator said. In view of this, Sebi said "PML cannot avail reimbursement of any amount for the services given to its clients from the AMCs whose direct plans are being sold by them to clients".
