The Securities and Exchange Board of India (Sebi) has floated a new central mechanism for fee collection — Centralised Fee Collection Mechanism’ or CeFCoM, using which investors can pay fees to Investment Advisers (IAs) and Research Analysts (RAs).
Under the new mechanism, clients will be required to pay fees to Investment Advisers/Research Analysts (IAs/RAs) through a specific platform or portal overseen by a recognised Administration and Supervisory Body (ASB), as per the circular released by the capital martkets regulator.
The mechanism has been co-created by the BSE in collaboration with various stakeholders. This decision was prompted by the increasing attention towards the securities market and the call for enhanced transparency in fee transactions. The regulatory authority stated that the BSE will outline the detailed operational structure for this mechanism on or before September 23, with the mechanism set to become operational starting from October 1.
The circular stated, “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 regulatory authority emphasized that although the utilization of this platform for fee collection purposes is currently discretionary, the administration and supervisory body (ASB) is strongly advised to implement measures that promote the adoption of this mechanism among clients, as well as registered Investment Advisers (IAs) and Registered Representatives (RAs).
Furthermore, in the official communication circulated, the Securities and Exchange Board of India (Sebi) also appealed to IAs and RAs to actively promote and facilitate the adoption of this method for processing fee payments by clients.
This circular, which has been issued in the execution of powers granted under Section 11(1) of the Securities and Exchange Board of India Act, 1992, in conjunction with regulation 14 and regulation 15A of SEBI (Investment Advisers) Regulations, 2013 and SEBI (Research Analysts) Regulations, 2014, aims to safeguard the interests of investors in the securities market and foster the growth of, as well as oversee, the securities market.