In a move to safeguard the interest of investors, the Securities and Exchange Board of India (SEBI) on Tuesday prepared a consultative paper for the regulation of fees and charges charged by portfolio managers. The move is likely to to bring clarity in the way computation and charges are paid by the client.
The move came after the market regulator received several investor complains relating to fees being charged by portfolio managers.
“Upon scrutiny of the complaints, it has come to the notice of SEBI that the clauses relating to fees and charges in the portfolio manager-client agreement do not always clearly reflect the fees and charges payable by the client and the manner of computation of the same,” said a statement from the regulator.
In order to bring in more clarity, transparency and uniformity with regard to fees and charges, SEBI has directed portfolio managers to include various clauses in the client agreement.
The market regulator has directed clauses on a trigger point for performance fee, a cap on the total liability of the client, amount of fee on the assets under management and on the transparency and dispute settlement.
According to experts, SEBI’s recommendations are steps in the positive direction.
“This is good for this investment platform as higher transparency and better regulation will make investors more confident to come and invest here,” said Surya Bhatia, a Delhi-based financial planner.
SEBI has put a copy of the consultative paper on its website and individuals can post their comments on the same by August 9, 2010.