The registration fee for
corporates and limited liability partnerships has gone up by 400% from Rs. 1
lakh earlier to Rs. 5 lakh now.
Despite
the lackluster response from distributors to register as Investment Advisers, market
regulator SEBI has hiked the registration fee by 400% for those wanting a
Registered Investment Advisor (RIA) status.
While
the application fee and registration fee for individuals and firms (partnership
firm) remains unchanged, corporates and those having LLP structure have to
cough up a higher amount if they wish to register with SEBI. Individuals and partnership
firms have to pay Rs. 5,000 as application fee and Rs. 10,000 as registration
fee, which is the same as earlier.
However,
corporates and limited liability partners have to cough up Rs. 25,000 as
application fee and Rs. Rs. 5 lakh as registration and renewal fee. Earlier,
they had to pay Rs. 5,000 as application fee and Rs. 1 lakh as registration
fee.
Advisors
have to pay the renewal fee every five years to retain their license.
The
hike in fee for LLP category is likely to hurt advisors because many of them are
changing their legal structure from individuals and Pvt. Ltd to LLP of late. Advisors
are questioning the rationale of such a substantial hike in fee. “No
professional like doctor or chartered accountant requires capital adequacy. I
don’t understand the need for hiking fee. This will create more entry barriers.
There are so many anomalies in the SEBI Investment Adviser Regulations. This is
deterring advisors from registering with SEBI,” said a SEBI registered IA from
Mumbai wishing anonymity.
Advisors
say that the cost and entry barrier will increase with the upward revision in
fee.
“Such
a quick and sharp revision in fee is not justified. IFAs who are contemplating
to become RIAs will shelve their plans. Corporates need to have net worth of
Rs. 25 lakh and on top of that the registration fee has been hiked to Rs. 5
lakh. It would be difficult for advisors to recover this cost. It is
justifiable if they link the fee with the income from advisory business,” says
M S Shabbir of SenSage Financial Services.
Suresh
Sadagopan of Ladder 7 Financial Advisory said “The hike is ill-timed. Advisors
are finding it difficult to charge fee from clients. This will increase the
cost for us. The fee could have been hiked after a couple of years. It is too
early. So far only 150 have registered but going forward not many would even
consider becoming a RIA.”
Melvin
Joseph of Finvin Financial Planners says that the concept of IA
has many loopholes. “Many IFAs and corporates have shifted their distribution
business to another ARN and have registered as RIAs. How can they give sound
advice? Their main source of income continues to be from distribution. The
‘arm’s length distance’ criteria defeats the whole purpose of investment
advisor. Also, the fee hike is unreasonable”
Costs
and complexities associated with RIA have deterred many advisors from registering
with SEBI. Out of the 80,000 ARN holders, only 156 have registered with SEBI as
Investment Advisers.
Rising
cost
Individuals & firms
|
Corporates and LLP
|
|||
Earlier
|
Now
|
Earlier
|
Now
|
|
Application fee
|
5000
|
5000
|
5000
|
25000
|
Registration fee
|
10000
|
10000
|
100000
|
500000
|
Source : SEBI
|
||||
Source: Team Cafe Mutual
