Mumbai: The capital market regulator’s centralized fee collection mechanism, aimed at ensuring that investors pay only registered investment advisers and research analysts, is seeing slow adoption since its launch nearly nine months ago due to its optional status and limited awareness, according to industry participants.
Since it was introduced by the Securities and Exchange Board of India (Sebi), the platform has seen collections worth ₹5 crore, according to a statement released by the regulator on 12 June.
Managed by BSE Ltd. and MF Utilities India Pvt. Ltd. (MFU), the mechanism went live on 1 October 2024, offering a closed and auditable ecosystem to help investors avoid unregistered operators.
India has approximately 1,300 registered investment advisors (RIAs) and 1,371 research analysts (RAs) for the 11.4 crore investors, according to data by the National Stock Exchange (NSE).
The usage of the mechanism has been steady, particularly among digitally enabled research advisers and analysts, according to Ganesh Ram, managing director & chief executive officer of MFU. “However, since the facility is optional as per Sebi, adoption has been gradual,” said Ram. “We are yet to do major promotions or marketing as we wanted to first ensure the system’s stability.”
Ram noted that larger firms are increasingly using the platform. “It’s a fully web-based portal and full stack API, that supports all payment modes—e-mandates, ad-hoc payments, and recurring mandates including UPI. Advisors can track payments from all investors in one place,” he said. “Since MFU also facilitates mutual fund transactions, it becomes an added advantage for users.”
The platform charges an annual subscription fee of around ₹7499, Ram said, which covers related charges and platform features, maintenance, etc.
While the central fee collection mechanism (CeFCoM) offers clear advantages for compliance and traceability, some experts caution against any move to make it mandatory.
CeFCoM is “undoubtedly a valuable enabler for individual registered investment advisers (RIAs),” especially solo practitioners who typically lack access to traditional payment gateways, according to Harsh Roongta, member of Sebi’s Alternative Investment Policy Advisory Committee (AIPAC) and founder of Fee Only Investment Advisers LLP . However, “making CeFCoM mandatory would be counterproductive for several reasons”, he said.
“As Sebi-registered intermediaries, RIAs are also required to register with platforms like ValidPay, which support UPI-based fee collection—an option that is more cost-effective, real-time, and client-friendly,” he said. “Mandating CeFCoM would restrict access to such alternatives and raise unnecessary questions from clients.”
He also pointed to structural issues. “CeFCoM was originally conceived as a surveillance mechanism to monitor that fees remain within Sebi’s prescribed limits…and requires each client to be registered with BASL (BSE Administration and Supervision Ltd). This process is still largely manual and often delayed, making CeFCoM unsuitable for digital-first or time-sensitive advisory models.”
Roongta cautioned about financial implications as well. “It comes at a cost— ₹11,800 annually, with an added delay of one working day in crediting fees. If made mandatory, the associated costs are likely to rise further, imposing a financial burden on already resource-constrained RIAs.”
Mixed industry response
Several advisers who have adopted CeFCoM praised its utility, but acknowledged challenges.
“We adopted CeFCoM as soon as it was activated. It took a month or two to onboard most of our clients, but now a large part of our collections go through the system,” said Vivek Rege, founder and CEO of V R Wealth Advisors Pvt. Ltd. “CeFCoM is ultimately about investor protection… It gives clients confidence that they’re dealing with a registered adviser.”
Renu Maheshwari, vice chairperson of Association of Registered Investment Advisers (ARIA) and CEO of Finscholarz Wealth Managers LLP, said her firm has transitioned from MFU’s earlier e-collect system to CeFCoM seamlessly. “It’s working smoothly now, though NRI payments are still a grey area,” Maheshwari. “Anything that becomes mandatory should not be disruptive. At this stage, keeping CeFCoM optional gives RIAs the freedom to adopt at their own pace.”
Other advisers say the bigger challenge lies in the system’s low visibility. “Ask any investor—do they even know what CeFCoM is? Or that it exists as a safer alternative? Sebi hasn’t publicized it,” said Kavitha Menon, founder of Probitus Wealth and an ARIA board member. She argued that “India doesn’t know about registered investment advisers, let alone CeFCoM.”
Menon also flagged the cumbersome onboarding and associated costs. “The registration process is still cumbersome—for both adviser and client… ₹11,800 a year may not sound like much, but for many individual advisers with modest earnings, it’s a burden.”
In response to Mint’s queries, Sebi said it had floated a discussion paper in August 2023 to assess whether CeFCoM should be mandatory. “Based on the responses received, it was decided to make it optional. Change can be considered inter alia, based on the industry demand for it,” a spokesperson said.
While the regulator maintained that CeFCoM was not primarily intended as a surveillance tool, it emphasized that the mechanism helps investors distinguish between registered and unregistered entities. “Clients being able to move towards registered entities in this regulated bubble is the aim of the CeFCoM,” the spokesperson added.
Sebi acknowledged limited awareness as a challenge, but pointed to growing traction. “Despite being optional, more than ₹5 crore of fees has been collected through this mechanism; [that] demonstrates some traction,” it said.
