SEBI (Investment Advisers) Regulations, 2013 by Paytm Money Limited (PML)

Last updated: 24 April 2021

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This notification provides an interpretative letter from SEBI regarding the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, specifically for Paytm Money Limited (PML). It addresses PML's queries on whether they can seek reimbursement for out-of-pocket expenses from Asset Management Companies, if electronic client consent is sufficient for advisory agreements, and who can be appointed as a Principal Officer. SEBI clarifies that PML cannot claim reimbursement for services rendered to clients and that electronic consent alone may not fulfil the mandatory agreement requirements. Furthermore, only specific senior management roles, as defined by the regulations, can be designated as Principal Officer.

Securities and Exchange Board of India GENERAL MANAGER INVESTMENT MANAGEMENT DEPARTMENT DIVISION OF FUNDS-1 SEBI/H0/1MD/DF1/0W/P/2021/000008743/1 April 9, 2021 Paytm Money Limited B-121, Sector-5, Noida, Uttar Pradesh- 201301 Dear Sir, Sub: Request for interpretative letter under Securities and Exchange Board of India (Informal Guidance) Scheme 2003 in connection withSecurities and Exchange Board of India (Investment Advisers) Regulations, 2013by Paytm Money Limited (PML)

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FAQ :

No, PML cannot avail reimbursement for services provided to its clients from AMCs whose direct plans they are selling. This is due to Regulation 22A of the IA Regulations, which restricts investment advisers from charging any implementation fees or receiving any form of consideration for such services.

SEBI has clarified that merely seeking electronic consent and sharing it via email may not be considered sufficient compliance with the IA Regulations and the relevant circular. A mandatory written agreement, as specified by SEBI, is required before rendering any investment advice or charging fees.

According to Regulation 2(1)(s) of the IA Regulations, the Principal Officer must be the managing director, designated director, managing partner, executive chairman of the board, or a member of an equivalent management body responsible for the overall business and operations. A department head overseeing advisory functions is not eligible unless they hold one of these specific senior roles.

Regulation 22A states that investment advisers can provide implementation services through direct schemes but cannot charge any commission, referral fees, or implementation fees from the client, directly or indirectly. Clients are also not obligated to use these implementation services.

PML sought an interpretative letter under the SEBI (Informal Guidance) Scheme, 2003, to seek clarification on specific aspects of the SEBI (Investment Advisers) Regulations, 2013, concerning their operations as an investment adviser.

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Notification No : SEBI/H0/1MD/DF1/0W/P/2021/000008743/1
Published in Investments & Personal Finance
Source : https://www.sebi.gov.in/sebi_data/commondocs/apr-2021/sebi_let_IG_paytm_p.pdf

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