Advisory clients cannot be charged broking fees: Sebi tells HDFC Securities1 min read . Updated: 13 Jan 2021, 07:20 PM IST
- Under Sebi investment advisory rules, Registered Investment Advisors (RIAs) cannot charge clients for execution services such as stock broking or mutual fund transactions
HDFC securities cannot charge broking fees from its advisory clients, market regulator Sebi has clarified in a letter dated 8 January. The statement came following a request by the stock broking company.
Under Sebi investment advisory rules, Registered Investment Advisors (RIAs) cannot charge clients for execution services such as stock broking or mutual fund transactions. This prohibition also includes a ban on broking fees, the regulator clarified.
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HDFC Securities had launched an advisory business in 2018. Other banks such as Axis and ICICI Bank also offer advisory services through their associated broking companies.
"HDFC Bank’s advisory business was reorganized under HDFC Securities in line with RBI regulations around 1.5 years ago. On average, our clientele had a family net-worth of ₹10 crore. With the new Sebi rules requiring providers to offer either advisory or distribution to the same client at a group level, we are evaluating our proposition including helping clients achieve financial goals," Raveendra Balivada, the head of investment advisors, HDFC Securities told Mint in September.
From 1st October, Sebi mandated that the same client cannot be charged for both advisory and distribution services (such as broking), a rule that affected large corporate groups which offered different types of financial services through different subsidiaries.
"We had stopped onboarding customers for our advisory business after a Sebi circular came out which said that distribution and advisory fees cannot be charged to the same customer - effective 1st October, 2020. We are planning to re-launch fee-based advisory which was earlier offered at no cost to our broking clients. This is why we asked for this guidance. We will not charge advisory clients any broking fees, as per the guidance letter of the regulator," said Dhiraj Relli, MD and CEO of HDFC Securities.