Sebi details segregation guidelines of investment adviser, distributor roles

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Mumbai: The Securities and Exchange Board of India on Wednesday provided detailed guidelines to investment advisers (IA), after it notified the segregation of advisory and distribution activities at client level to avoid conflict of interest, on July 3.

The markets regulator said the IA can charge fees from the clients through assets under advice (AUA) mode or fixed fee mode.

Under the first mode, the maximum fees that may be charged will not exceed 2.5 per cent of AUA per annum per client across all services offered by IA, and any portion of AUA held by the client under any pre-existing distribution arrangement with any entity will be deducted from AUA for the purpose of such fees.

Under the fixed fee mode, the maximum fees will be capped at Rs 1,25,000 per annum per client across all services offered by IA.

To ensure client level segregation at IA’s group/family level, existing clients who wish to take advisory services, will not be eligible for availing distribution services within the group/family of IA, and vice versa for those availing advisory services. The option to avail either advisory services or distribution services will be made available to such clients at the time of onboarding.

In case of an individual client, the family of the client will be reckoned as a single client and PAN of all members in the family will jointly and severally be the control record.

The market regulator also directed IAs to advise direct plans (non-commission based) of products only.

Also, IA should enter into an investment advisory agreement with its clients including existing clients latest by April 1, 2021 and submit a report, confirming the same to Sebi latest by June 30, 2021, Sebi said.

IA should ensure that annual audit in respect of compliance of Sebi regulations is completed within six months from the end of each financial year.



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