Under the new proposed mechanism, Sebi wants to form a supervisory body of IAs/RAs to provide facilities for centralized fee collection through its portal.
Once the rules are implemented, cash will not be an option for investors to pay RAs and IAs as payment options will be limited to online modes and cheque.
Sebi said that this ecosystem will help investors ensure that their payments are reaching only registered IAs and RAs. As a corollary, this would also help investors identify, isolate and avoid unregistered entities, who would be unable to access this closed ecosystem, the regulator said.
“Payment of fees to IAs and RAs through the proposed mechanism shall also provide clarity to investors regarding the registration status of the entity. It will also instill confidence among investors that fees are being paid to a SEBI registered IA/ RA and will motivate them to approach only registered IAs/RAs for all their investment advisory/research service needs,” it said in a discussion paper.
Any payment made outside the mechanism shall not be considered as payment towards investment advisory/research services and grievances in this regard shall also not be entertained.
While RAs and IAs have welcomed the move to streamline the fee collection process, they suggest that the regulator should make the process simplerTo accept payment from clients, RAs and IAs will have to log in to the membership portal of the supervisory body and register each client manually by entering her details. Once the details are validated, a payment link would be sent to the client for those making payment via netbanking, debit card or UPI. For those wanting to pay via NEFT, RTGS, IMPS or cheque, intimation will be sent to clients to pay the fee in virtual accounts.
Investment advisors say fee collection can be made simpler with the use of APIs (Application Programming Interface) or other automated tools to reduce the cumbersome and time-consuming mechanism.
“SEBI’s draft framework for financial advisory in India is a commendable step forward, laying the groundwork for scalable, regulated advisory services. However, the integration of advanced automation is crucial. Without it, the current number of Registered Advisors might find it challenging to comprehensively serve the vast and growing retail advisory needs of our nation,” said RIGI co-founder Swapnil Saurav.
SEBI-registered RA Nikhil Gangil, who runs Intrinsic Value Equity Advisors, said the new proposed mechanism could spell disaster for smaller players in the industry who work in teams of just 1-2 people.
“The bigger players who run advisory services with large teams will gain as they can afford it. For smaller ones, it will be a huge burden as they will have to get clients registered every time,” Gangil said.
Kolkata-based RA Bijay Kumar Sharma said the step will curb the rise of fake Telegram channels in the name of registered advisors. “Once this mechanism starts, all fake activities will stop. I get 8-10 complaints of fake accounts operating in my name every month,” he said.