SEBI Relaxes Advance Fee Restrictions for Investment Advisers and Research Analysts

SEBI, through its Circular dated April 2, 2025, has relaxed the provisions regarding the advance fee structure for Investment Advisers (IAs) and Research Analysts (RAs). Previously, in February 2025, SEBI had issued a consultation paper proposing an extension of the permissible advance fee period to one year for both IAs and RAs. The earlier restrictions limiting RAs to three months and IAs to two quarters, were seen as a deterrent to providing long-term investment recommendations.

𝑲𝒆𝒚 𝑹𝒆𝒈𝒖𝒍𝒂𝒕𝒐𝒓𝒚 𝑪𝒉𝒂𝒏𝒈𝒆𝒔:

1. 𝐄𝐱𝐭𝐞𝐧𝐝𝐞𝐝 𝐀𝐝𝐯𝐚𝐧𝐜𝐞 𝐅𝐞𝐞 𝐏𝐞𝐫𝐢𝐨𝐝
(a) Previously, IAs were permitted to charge fees in advance for up to two quarters, while RAs were restricted to three months.
(b) Under the new guidelines, both IAs and RAs may now charge advance fees for up to one year, provided the client agrees to such terms.

2. 𝐑𝐞𝐯𝐢𝐬𝐞𝐝 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐅𝐞𝐞 𝐑𝐞𝐬𝐭𝐫𝐢𝐜𝐭𝐢𝐨𝐧𝐬
(a) 𝐒𝐜𝐨𝐩𝐞 𝐨𝐟 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲: Fee-related provisions, including fee limits, payment modes, refunds, advance fees, and breakage fees, shall apply only to individual and Hindu Undivided Family (HUF) clients, provided they are not accredited investors.
(b) 𝐄𝐱𝐞𝐦𝐩𝐭𝐞𝐝 𝐂𝐚𝐭𝐞𝐠𝐨𝐫𝐢𝐞𝐬: Non-individual clients, accredited investors, and institutional investors availing proxy advisory services shall remain exempt from the same and will continue to operate under bilaterally negotiated contractual terms.

The extended fee window allows for better alignment with long-term advisory models, improving revenue predictability.

A copy of the Circular is attached herein for your reference.

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