During a conference, Sebi chairperson, Madabi Puri Buch asked the Regulated Investment Advisers (RIA) to sign petitions saying they have no difficulty in implementing the proposal for a centralized fee collection portal and they are not opposed to furnishing data periodically.
Signing Petition To SEBI
This all happened at the Q&A session of the Association of Registered Investment Advisers conference where Buch was talking about how IAs get fees from profit sharing, referral income or selling other products which are not regulated by Sebi.
Buch said that ‘We need the good guys to help us’, further speaking about the importance of creating guardrails in coordination with the industry.
While tearing into not-so-credible & even fake advisors, algo-sellers and influencers who’re luring gullible investors, Buch stressed on the importance of advisors registering with the market regulator, to help curb malpractices.
The head of Fee-Only Investment Advisors, Harsh Roongta was talking about how the world has changed as RIAs have increasingly been collecting income only from clients.
Atreworld, Buch asked the participants to sign a petition saying the RIAs who are not getting other income would have no difficulty in implementing the central fee collection mechanism.
Further Buch noted, “Everyone who raised their hands saying they don’t get any income from any other products should sign the petition saying we support the central fee collection mechanism and give an undertaking that there is no other direct or indirect billing to the client.”
Implementation Of A Centralized Fee Collection Mechanism
Prior to this, Sebi put out a consultation paper with a proposal to set up a central fee collection mechanism through which clients can pay fees to their IAs and RAs.
This move by Sebi is to ensure that clients are paying fees to a Sebi-registered entity.
This me humanism will also help clients in identifying registered entities as the mechanism won’t be available to unregistered entities.
Moving ahead, Roongta asked the Sebi chairperson to bring segmented regulation for different market segments considering the difficulty for a financial planner or a non-trading call provider to identify malpractices happening in a trading call.
According to him, the common regulation for different segments is an ‘accident of history’.
Further, Buch mentioned the difficulties in regulating different segments of the market.
She said that it could be done in the future when account aggregators get more advanced which will allow the regulator to monitor individual and joint bank accounts of RIAs in order to make sure that they are not doing illegal PMS (Portfolio Management Service).
Adding, “We are open to segmentation, but unfortunately haven’t reached that stage. In the future, if someone comes and says to Sebi that they need a regulation exclusively for them, Sebi can ask them to consent to monitor their bank account, and of their family members and registered entities so we can exactly know what is coming in and out.”
Lateron, Buch asked the RIAs to sign the second petition in which they wish the Sebi to bring a regulation which requires industry players to periodically submit granular data so that the richness of data can facilitate better policy-making.
