Master Circular for Investment Advisers

SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/94 · 2025-06-27 · SEBI

Summary

This part introduces the Master Circular for Investment Advisers issued by SEBI to consolidate applicable circulars into a single document. It supersedes the previous Master Circular dated May 21, 2024, and rescinds specific earlier circulars listed in the Appendix while preserving legal continuity for past actions. The section also provides the Table of Contents outlining the various guidelines, administrative frameworks, and annexures contained within the full circular. This section outlines guidelines for Investment Advisers regarding the segregation of advisory and distribution activities at the client level. It mandates specific terms in investment advisory agreements, including a prohibition on executing trades without explicit consent. Additionally, it defines permissible fee structures, allowing changes between Assets under Advice and fixed fee modes with updated monetary limits. This section outlines fee calculation exclusions, AUA demonstration requirements, and specific applicability of fee limits to individual and HUF clients. It establishes deposit requirements for Investment Advisers based on client volume and details the transition from individual to non-individual I

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In order to enable users to have access to the applicable circulars at one place, this Master Circular in respect of IAs is being issued.

The provisions of such circulars issued until June 11, 2025 have been incorporated in this Master Circular, which supersedes the Master Circular for IAs dated May 21, 2024.

Anything done or any action taken or purported to have been done or taken under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular.

Any application made to the Board under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular.

The previous operation of the rescinded circulars or anything duly done or suffered thereunder... shall remain unaffected as if the rescinded circulars have never been rescinded.

This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

To ensure client level segregation at IA’s group/family level, existing clients wishing to take advisory services will not be eligible for availing distribution services within the group/family of IA. Similarly, existing clients who wish to take distribution services will not be eligible for availing advisory services within the group/family of IA. A new client will be eligible to avail either advisory or distribution services within the group/family of IA. However, the option to avail either advisory services or distribution services shall be made available to such client at the time of on boarding. Client under these guidelines shall include individual client or non-individual client. The client shall have discretion to continue holding assets prior to the applicability of this segregation under the existing advisory/distribution arrangement. However, the client shall not be forced to liquidate/switch such existing holdings. Permanent Account Number (PAN) of each client shall be the control record for identification and client level segregation. In case of an individual client, “family of client” shall be reckoned as a single client and PAN of all members in “family of client” would jointly and severally be the control record. However, the same is not applicable for non-individual clients. The dependent family members shall be those members whose assets on which investment advisory is sought/provided, originate from income of a single entity i.e. earning individual client i

Regulation 19(1)(d) of the IA Regulations provides that IA shall enter into an investment advisory agreement with its clients. The said agreement shall mandatorily cover the terms and conditions provided in Annexure A and Most Important Terms and conditions (MITC), as standardized by Industry Standard Forum in consultation with IAASB and SEBI, provided in Annexure B. MITC must include the following as terms and conditions: “This agreement is for the investment advisory services provided by the IA and IA cannot execute/ carry out any trade (purchase/ sell transaction) on behalf of the client without his/her specific and positive consent on every trade. Thus, you are advised not to permit IA to execute any trade on your behalf without your explicit consent.” IA shall incorporate the MITC into the investment advisory agreement and shall disclose and take consent from clients on the agreement. Consent of client to agreement between IA and client may be signed by the client in person or through any other legally acceptable mode including DigiLocker enabled Aadhaar based e-signature facility. IAs shall also provide guidance to their clients in the agreement on the optional ‘Centralised Fee Collection Mechanism for IA and RA’ (CeFCoM). IA can also include additional terms and conditions in the agreement without diluting the provisions of the IA Regulations and amendments thereto as well as circulars issued thereunder. IA shall ensure that neither any investment advice is rendered no

Regulation 15A of the IA Regulations provides that IAs shall be entitled to charge fees from a client in the manner as specified by SEBI. Accordingly, IAs can charge fees under two modes, namely, (i) Assets under Advice (‘AUA’) mode, which is subject to a limit of 2.5 per cent of AUA per annum per family of client across all services offered by IA, and (ii) Fixed fee mode, which is subject to a specified fee limit (earlier limit ₹ 1,25,000) per annum per family of client across all services offered by IA. The maximum fee that may be charged by the IA under the fixed fee mode now stands revised and shall not exceed ₹ 1,51,000 per annum per family of client. The fee limit shall be revised and announced by IAASB once in three years based on the Cost Inflation Index (CII) after due consultation with SEBI. In terms of the earlier provisions, IA could charge fees from a client under any one mode, i.e., Assets under Advice (AUA) mode or fixed fee mode on an annual basis. Change of mode, if any, could be effected only after twelve months of on-boarding/last change of mode. In order to provide more flexibility in charging of fees, IAs have now been allowed to change the fee mode for a client at any time, without restriction on the minimum period between two fee mode changes. The maximum fee that can be charged by the IA shall, however, not exceed the higher of fee limit under the fixed fee mode or 2.5 per cent of AUA per annum per family of client.

The fee limits do not include statutory charges.

IA shall be required to demonstrate AUA with supporting documents like demat statements, unit statements etc. of the client.

Any portion of AUA held by the client under any pre-existing distribution arrangement with any entity shall be deducted from AUA for the purpose of charging fee by the IA.

Source: SecMarx — Master Circular for Investment Advisers. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.