SEBI’s new fee platform aims to protect investors

Mumbai Mumbai: The capital markets regulator’s centralised fee collection system, aimed at ensuring that investors pay only registered investment advisers and research analysts, has seen slow adoption since its launch nearly nine months ago due to its optional status and limited awareness, according to industry participants. Since it was introduced by the Securities and Exchange Board of India (SEBI), the platform has seen collections of ₹5 crore, according to a statement issued by the regulator on June 12.

Managed by BSE Ltd and MF Utilities India Pvt Ltd (MFU), the system goes live on October 1, 2024, providing a closed and auditable ecosystem to help investors avoid unregistered operators. According to data from the National Stock Exchange (NSE), India has about 1,300 registered investment advisers (RIAs) and 1,371 research analysts (RAs) for 11.4 crore investors. According to Ganesh Ram, managing director and chief executive officer of MFU, the system is being used steadily, especially among digitally enabled research advisors and analysts. “However, since the facility is optional as per Sebi, it is being adopted slowly,” Ram said. “We are yet to do any major promotion or marketing, as we wanted to ensure the stability of the system first.” Ram said large firms are increasingly using the platform. “It is a completely web-based portal and full stack API, which supports all payment modes- e-mandates, ad-hoc payments and recurring mandates including UPI.

Advisors can track payments of all investors at one place,” he said. “Since MFU also facilitates mutual fund transactions, it becomes an added benefit for users.” Ram said the platform charges an annual subscription fee of around ₹7499, which includes related fees and platform features, maintenance, etc. While the Central Fee Collection Mechanism (CeFCoM) offers clear benefits for compliance and traceability, some experts caution against any move to make it mandatory. According to Harsh Roongta, member of Sebi’s Alternative Investment Policy Advisory Committee (AIPAC) and founder of Fee Only Investment Advisors LLP, CeFCom is undoubtedly a valuable enabler for individual registered investment advisors (RIAs), especially solo practitioners who typically do not have access to traditional payment gateways. However, he added that “making CeFCom mandatory would be counterproductive for several reasons”.

“As Sebi-registered intermediaries, RIAs are also required to register with platforms such as Validpay, which support UPI-based fee collection – an option that is more cost-effective, real-time and client-friendly,” he added. “Making CeFCom mandatory will restrict access to such options and raise unnecessary questions from clients.” He also pointed to structural issues. “CeFCoM was originally conceived as a monitoring mechanism to monitor that fees remain within SEBI’s prescribed limits…and requires each client to be registered with BASL (BSE Administration and Supervision Ltd).

This process is still largely manual and often involves delays, making CeFCoM unsuitable for digital-first or time-sensitive advisory models.” Roongta also warned of the financial implications. “It costs ₹11,800 annually, with an additional delay of one working day in depositing the fee. If it is made mandatory, the costs associated with it are likely to increase even further, increasing the financial burden on already resource-constrained RIAs.” Industry response mixed Many advisors who have adopted CeFCoM praised its utility, but also acknowledged the challenges. “We adopted CeFCoM as soon as it was activated. It took a month or two for most of our clients to join, but now a large portion of our collections go through the system,” said Vivek Rege, founder and CEO, We Are Wealth Advisors Pvt Ltd. “CeFCoM is ultimately about investor protection… It gives clients confidence that they are dealing with a registered advisor.”