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Bombay High Court upholds SEBI’s powers to fix manner of charging of fees by investment advisors

Our Bureau Mumbai | Updated on June 29, 2021

Purnartha Investment Advisers had challenged SEBI’s power in issuing the circular

The Bombay High Court has upheld market regulator SEBI’s powers to fix the manner in which fees will be charged by investment advisors.

“Investment Advice is a profession/business which has come about as an adjunct of the securities market; the Investment Advisor works because investors need professional advice for participating in the affairs of the securities market. It is the statutory duty of SEBI to protect such investors and develop and regulate that market inter alia by regulating the working of Investment Advisors,” the court said while disposing-off a case filed by an investment advisor challenging SEBI’s circular issue in September 2020.

Also read: SEBI set to finalise norms to bring in new exchanges

SEBI had asked investment advisors to segregate advisory and distribution activities at the client level. It had even capped their fees based on two alternatives — charges based on assets under advice or a predetermined fixed amount per annum for each client that cannot exceed ₹1.25 lakh.

Challenged in court

This was challenged by Purnartha Investment Advisers, questioning the power by which SEBI had issued the circular. It also termed the circular as a breach of the fundamental right of investment advisors to carry on a profession of their choice by enacting unreasonable restrictions.

The High Court, however, observed that, “There is no merit in the challenge to the impugned Regulation as well as the impugned Circular prescribing modes as well as ceiling of fees to be charged by Investment Advisors.”

Published on June 29, 2021

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