Q.35: If we are offering advisory service on the personal portfolio of the client but the client pays fees from the company he owns, is there any compliance-related issue?

We have also got one signed document from the client (owner of the company) that the advisory fee for the personal portfolio advisory will be paid from the company’s account.

Please guide with some references from SEBI Regulation.

Response:

The SEBI IA Guidelines Circular dt. 23-9-2020 suggests in Annexure-A prescribed under Regulation 19 (1) (d) of the amended IA Regulations, that “fees shall not be accepted in cash”. It also prescribes that, the payment of fees shall be through a mode which shows traceability of funds.”

The following provision may seem to be attracted in your case, but actually it is NOT ATTRACTED:

Regulation 15 (2) of the IA Regulations states that “An investment adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the client being advised, in respect of the underlying products or securities for which advice is provided.”

Conclusion:

It is simply a commercial practicality to receive payable dues of a client through another entity or person, based on the client’s advice. In which case, you shall obtain written acknowledgement of such advice signed by the client. This you have already followed. So, it is fine.