SEBI eases fee collection rules for investment advisers, research analysts

Markets regulator SEBI on Monday decided to allow investment advisers (IAs) and research analysts (RAs) to collect advance fees for up to one year, easing the existing restrictions on fee collection periods.

IAs can currently charge advance fees for a maximum of two quarters, while RAs were limited to one quarter.

SEBI had initially imposed limits on advance fee collection to protect investors from being locked into long-term payments for services that might not meet their expectations.

However, the regulator received representations from RAs arguing that the restrictions disincentivise them from offering long-term recommendations, cause inconvenience and increase costs for both clients and research analysts.

According to industry representations, the short billing cycles encourage advisers and analysts to focus on short-term gains rather than long-term investment strategies.

"In order to address those concerns, the board has decided that if agreed by the client, IAs and RAs may charge fees in advance up to a period of one year. Earlier, IAs and RAs were allowed to charge advance fees for a maximum period of two quarters and one quarter respectively," newly appointed SEBI Chairman Tuhin Kanta Pandey told reporters after the meeting.

SEBI clarified that fee-related compliance requirements—such as limits on fees, payment modes, refunds, and breakage fees—will only be applicable to individual and Hindu Undivided Family (HUF) clients.

"Thus, these conditions do not apply to nonindividual clients, accredited investors, and in case of institutional investors seeking recommendation of proxy adviser. In such cases, fee related terms and conditions shall be governed through bilaterally negotiated contractual terms," a release said.