SEBI Allowed IAs and RAs to Charge Advance Fees For Up to One Year

On Wednesday, April 3, 2025, the capital market regulator, the Securities and Exchange Board of India (SEBI), announced new guidelines allowing investment advisers (IAs) and research analysts (RAs) to charge advance fees for up to 1 year. This is an update from the previous rules, where IAs could charge fees in advance for up to two quarters, and RAs could only charge for a quarter.

SEBI stated in circular, “If agreed by the client, IAs and RAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year”

Scope of New Provision for RAs and IAs

The new provisions regarding fee limits, payment methods, fee refunds, advance fees, and breakage fees will apply only to individual clients and Hindu Undivided Families (HUFs), provided these clients are not accredited investors. These provisions will not apply to non-individual clients, accredited investors, or institutional investors seeking advice from a proxy adviser. For these clients, fee terms will be governed by bilaterally negotiated contracts.

Why SEBI Allowed Changes?

The changes came after concerns were raised regarding the restrictions on advance fee collection. SEBI received representations from both IAs and RAs, who argued that the existing limits on advance fees discouraged long-term recommendations. In response, SEBI issued a consultation paper to extend the advance fee period to one year for both IAs and RAs, which has now been implemented.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.