Can an Investment Advisor continue to collect performance – based fee whenever the same is due in terms of the agreement executed by the client, even if such fee is due on a date after March 31, 2021.

SEBI Response –


Regulation 15A of the SEBI (Investment Advisors) Regulation (‘IA Regulation’) states that “Investment Advisor shall be entitled to charge fees for providing investment advise from a client in the manner specified by the Board.” 

Clause 2(iii) of the SEBI Circular 2020/182 dated September 23, 2020 (“Circular”) states that under : 


Regulation 15 A of the amended IA Regulations provide that Investment Advisers shall be entitled to charge fees from a client in the manner as specified by SEBI, accordingly Investment Advisers shall charge fees from the clients in either of the two modes:

(A) Assets under Advice (AUA) mode

a. The maximum fees that may be charged under this mode shall not exceed 2.5 percent of AUA per annum per client across all services offered by IA. 

b. IA shall be required to demonstrate AUA with supporting documents like demat statements, unit statements etc. of the client. 

c. Any portion of AUA held by the client under any pre-existing distribution arrangement with any entity shall be deducted from AUA for the purpose of charging fee by the IA. 

(B) Fixed fee mode

The maximum fees that may be charged under this mode shall not exceed INR 1,25,000 per annum per client across all services offered by IA.

In terms of the Circular, compliance with , inter alia, clause pertaining to fees was to be ensured latest by April 01, 2021.

It is stated that, paras (c) and (d) of Clause 2(ii) the said Circular state as under:

c. IA shall ensure that neither any investment advice is rendered nor any fee is charged until the client has signed the aforesaid agreement and provided copy of signed agreement to the client.

 d. IA shall enter into investment advisory agreement with its clients including existing clients latest by April 01, 2021 and submit a report, confirming the same to SEBI latest by June 30, 2021

Further , Annexure – A to Circular stipulates, inter alia , following the terms and conditions to be incorporated in the Investment Advisory Agreement: Fees specified under Investment Advisory Regulations and relevant circulars issued thereunder & Fees charged to the client

Thus, in terms of the aforesaid provisions , IAs are not permitted to collect any fee other than the fee as specified in the aforesaid Circular. Further, IAs were mandatorily required to execute investment advisory agreement with their clients including their existing clients, which inter alia, incorporates the fees to be charged from the clients, including existing clients, latest by April 01, 2021.

The informal guidance can be accessed here.


Note – emphasis added.