Sebi permits IAs to offer paid second opinion to client on assets

Markets regulator Sebi on Thursday allowed Investment Advisers (IAs) to give a second opinion on a client's assets that are already under a pre-existing distribution arrangement, like those managed by another distributor. 

The move is aimed at making business easier for IAs and giving investors more flexibility to seek professional opinions.

Earlier, IAs were not allowed to charge fees on such assets. 

Now, IAs can charge a fee of up to 2.5 per cent annually of the asset value for providing a second opinion, Sebi said in its circular.

"In order to provide investors the opportunity of obtaining a second opinion on assets under pre-existing distribution arrangement with other entity, if so desired, it has been decided -- IAs may charge fee on such assets subject to a limit of 2.5 per cent of such assets value per annum," it said. 

However, IAs are required to disclose and get annual consent from clients, informing them that apart from the advisory fee, they will also continue to bear distributor-related costs on those assets, it added. 

Under the Sebi's rule, if a client's assets are already managed under another distributor, those assets must be excluded when calculating fees. 

It means Investment Advisers cannot charge fees based on such assets. 

However, industry bodies argued that this restriction stops IAs from giving a second opinion on those assets.

Accordingly, they requested Sebi to allow IAs to charge a fee for providing such second-opinion services.

The circular takes immediate effect.