Centralised Fee-Collection Platform For RIAs From October 1: Know More

Securities and Exchange Board of India (Sebi) on September 13, 2024, announced the launch of a Centralised Fee Collection Mechanism (CeFCoM) for registered investment advisors (RIAs) and research analysts (RAs) on an optional basis.

Clients will be able to pay IAs or RAs through a designated platform administered by a recognised administration and supervisory body (ASB) through this route. BSE Ltd is expected to specify the operational framework for this mechanism by September 23, 2024, and make it operational from October 1, 2024.

The new mechanism aims to ensure that investors are paying a registered intermediary and thus create a closed and transparent payment ecosystem. "With the growing interest in the securities market, there is a need for a mechanism for an investor to discern whether payment of fees is being made only to a registered IA/RA. In order to create a closed and transparent payment ecosystem, consultations were held with relevant stakeholders on the proposal of a separate centralised mechanism for fee collection by IAs and RAs," the circular said.

While the use of this platform for fee collection is currently optional, Sebi encourages registered IAs and RAs to avail of the services of this mechanism and asks them to urge clients also to do the same.

Sebi had earlier announced that the new system would allow payments through NEFT, RTGS, IMPS, cheques, etc. Once the payment reaches the unified platform, the supervisory body will then transfer the collected fee to the designated account of the respective RIA or RA.

RIAs in India have witnessed a fee structure evolution. Sebi recognizes two fee types for RIAs: flat fees capped at Rs. 1.25 lakh annually, or a fee up to 2.5 per cent of assets under advice annually. This shift aims to eradicate commission-based mis-selling and promote an unbiased fee-based model.