Executive Summary:
This SEBI circular, effective immediately, mandates that Investment Advisers (IAs) incorporate standardized Most Important Terms and Conditions (MITC) into their investment advisory agreements. IAs must inform existing clients of the MITC by June 30, 2025, and include the MITC in all new agreements. The MITC, standardized by the Industry Standards Forum (ISF), covers aspects such as fee structures, handling of funds, and conflict of interest management.
Key Points / Main Content:
Investment Advisory Agreement and MITC:
* IAs must include the standardized MITC, as defined by the ISF, in investment advisory agreements.
* For agreements after the circular date, MITC must be incorporated with client consent as per SEBI Circular SEBIHOMIRSD MIRSDPoD1PCIR2025003.
Communication of MITC to Clients:
* Existing clients must be informed of the MITC via email or other preservable means by June 30, 2025.
Terms and Conditions for IAs:
* IAs can only accept fees for advisory services and cannot accept client funds or securities.
* IAs must disclose products/services not under SEBI purview and obtain client acknowledgement that SEBI has no jurisdiction over these.
* IAs cannot guarantee returns or offer schemes with assured/guaranteed/fixed returns.
* IAs cannot execute trades without specific client consent for each transaction.
* For individual and HUF clients, fees are capped as per SEBI/IAASB guidelines: Rs 1,51,000 per annum per family under fixed fee or 2.5% of AUA per annum per family.
* Advance fees are allowed for a maximum of two quarters, with proportionate refunds for premature termination (subject to a breakage fee of one-quarter).
* Cash payments for fees are prohibited; payments must be made via cheque, online transfer, UPI, or CeFCoM.
* IAs must know client financial details and carry out risk profiling and suitability analysis.
* IAs and their group entities cannot provide distribution services to clients or their family members. They should advise direct, non-commission-based plans where available.
* IAs must promptly inform clients of any conflicts of interest.
Grievance Redressal:
* Clients should first contact the IA with grievances.
* Unresolved issues can be raised on SEBI's SCORES platform.
* If dissatisfied with SCORES, clients can use Online Dispute Resolution (ODR) through the Smart ODR portal.
General:
* SEBI registration, IAASB enlistment, and NISM certification do not guarantee IA performance or returns.
* Clients must keep contact details updated with the IA.
* IAs should never ask for clients' login credentials or OTPs.
Impact Analysis:
Investment Advisers (IAs):
* Impact: Must comply with the new MITC requirements in all advisory agreements and communications.
* Action Required: Update agreements with standardized MITC, inform existing clients, and ensure adherence to all provisions.
Existing Clients:
* Impact: Need to be informed about the MITC and understand their rights and obligations.
* Action Required: Review the MITC received from their IA and update contact details as needed.
New Clients:
* Impact: Will receive advisory agreements including the standardized MITC.
* Action Required: Review and understand the MITC before entering into an investment advisory agreement.
Securities and Exchange Board of India (SEBI) and Investment Adviser Administration and Supervisory Body (IAASB):
* Impact: Responsible for overseeing compliance and ensuring investor protection.
* Action Required: Monitor IAs adherence to the circular and address any non-compliance issues.
Key Entities Referenced
Securities and Exchange Board of India: The regulatory body for securities markets in India, responsible for protecting investors and promoting market development.
Investment Advisers: Entities or individuals registered with SEBI to provide investment advice to clients.
SEBI Investment Advisers Regulations, 2013: The regulations governing the activities and conduct of investment advisers in India.
Investment Adviser Administration and Supervisory Body (IAASB): An organization recognized by SEBI to administer and supervise investment advisers.
Most Important Terms and Conditions (MITC): A standardized set of terms and conditions that investment advisers must disclose to their clients, as specified by SEBI.
Industry Standards Forum (ISF): An industry body responsible for standardizing the MITC for Investment Advisers.
Securities and Exchange Board of India Act, 1992: The law that established SEBI and defines its powers and functions.
SCORES platform: SEBI's online platform for investors to lodge complaints and grievances.
भारतीय (cid:366)ितभूित और िविनमय बोड(cid:330)
Securities and Exchange Board of India
CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/19 February 17, 2025
To,
All Investment Advisers
Investment Adviser Administration and Supervisory Body (IAASB)
Madam / Sir,
Sub: Most Important Terms and Conditions (MITC) for Investment Advisers
1. In terms of Regulation 19(1) (d) of the SEBI (Investment Advisers) Regulations, 2013 (‘IA
Regulations’), an Investment Adviser (‘IA’) is required to enter into an investment advisory
agreement with its client. SEBI, vide Circular no. SEBI/HO/MIRSD/MIRSD-PoD-
1/P/CIR/2025/003 dated January 08, 2025 has inter alia specified that the investment
advisory agreement shall also include the Most Important Terms and Conditions (‘MITC’)
to be disclosed by IA and the same shall be standardized by Industry Standards Forum
(‘ISF’) in consultation with IAASB and SEBI.
2. In view of the above, the MITC for the services of IAs, as standardized by the ISF for
Investment Advisers in consultation with IAASB and SEBI is placed at Annexure A.
3. For existing clients, the MITC shall be informed by the IAs to the clients via email or any
other suitable mode of communication (which can be preserved) by June 30, 2025. For
investment advisory agreements entered by IA with clients after the date of this circular,
IAs shall incorporate the MITC into the investment advisory agreement and shall disclose
and take consent from clients in the manner specified in the Clause 2 (xi) of the SEBI
Circular no. SEBI/HO/MIRSD/ MIRSD-PoD-1/P/CIR/2025/003 dated January 08, 2025.
4. The provisions of this circular shall come into force with immediate effect.
5. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities
and Exchange Board of India Act, 1992 read with Regulation 19 (1) (d) of the IA
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Securities and Exchange Board of India
Regulations to protect the interests of investors in securities market and to promote the
development of, and to regulate the securities markets.
6. This circular is available on SEBI website at www.sebi.gov.in under the category: ‘Legal
→ Circulars
Yours faithfully,
Aradhana Verma
General Manager
Tel. No. 022-26449633
aradhanad@sebi.gov.in
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Securities and Exchange Board of India
Annexure A
Most Important Terms and Conditions (MITC)
[Forming part of the Investment Advisory Agreement]
1. The Investment Adviser (IA) shall only accept payments towards its fees for Investment
Advisory Services and is not permitted to accept funds or securities in its account on the
client’s behalf.
2. The IA does not guarantee returns, accuracy, or risk-free investments. All advice is
subject to market risks, and there is no assurance of any returns or profits.
3. Any assured/guaranteed/fixed returns schemes or any other schemes of similar nature
are prohibited by law. No scheme of this nature shall be offered to the client by the IA.
4. Investment advice, only related to securities shall fall under the purview of SEBI. In case
of any services offered by IA related to products/services not under the purview of SEBI,
IA shall make disclosure to the client and take appropriate declaration and undertaking
from the client that such products/services and the services of IA in respect of such
products/services do not come under regulatory purview of SEBI and that no recourse
is available to the client with SEBI for grievances related to such products/services or
services of IA in respect of such products/services.
5. This agreement is for the investment advisory services provided by the IA and IA cannot
execute/carry out any trade (purchase/sell transaction) on behalf of the client without
his/her/its specific and positive consent on every trade. Thus, the client is advised not to
permit IA to execute any trade on his/her/its behalf without explicit consent.
6. The fee charged by IA to the client will be subject to the maximum of amount prescribed
by SEBI/Investment Adviser Administration and Supervisory Body (IAASB) from time to
time (applicable only for Individual and HUF Clients).
Note:
(i) The current fee limit under Fixed Fee mode is Rs 1,51,000/- per annum per family
of client. Under Assets under Advice (AUA) mode, maximum fee limit is 2.5 per cent
of AUA per annum per family of client.
(ii) The IA may change the fee mode at any time with the client’s consent; however, the
maximum fee limit in such cases shall be higher of fee limit under the fixed fee mode
or 2.5 per cent of AUA per annum per family of client.
(iii) The fee limits do not include statutory charges.
(iv) The fee limits apply only for investment advice related to securities under purview of
SEBI.
(v) The fee limits do not apply to a non-individual client / accredited investor.
7. IA may charge fees in advance if agreed by the client. Such advance shall not exceed
the period stipulated by SEBI; presently it is maximum two quarters. In case of pre-
mature termination of the IA services by the client or the IA, the client shall be entitled
to seek refund of proportionate fees only for unexpired period. However, IA is entitled to
retain a maximum breakage fee of not greater than one-quarter fee.
8. Fees to IA may be paid by the client through any of the specified modes like cheque,
online bank transfer, UPI, etc. Cash payment is not allowed. Optionally the client can
make payments through Centralized Fee Collection Mechanism (CeFCoM), managed
by BSE Limited (i.e. currently recognized IAASB).
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Securities and Exchange Board of India
9. The IA is expected to know the client’s financial details for providing services. Hence,
the client is required to share the financial information (e.g. income, existing
investments, liabilities, etc.) with the IA.
10. The IA is required to carry out the client’s risk profiling and suitability analysis before
providing services and thereafter on an ongoing basis. The services provided will be in
line with the assessed risk profile. IA shall also communicate the assessed risk profile
to the client.
11. As part of conflict of interest management, the client or the client’s family members will
not be provided any distribution services by IA or any of its group entity/ family members.
IA shall, wherever available, advice direct plans (non-commission based) of products
only.
The IA shall endeavor to promptly inform the client of any conflict of interest that may
affect the services being rendered to the client.
12. For any grievances,
Step 1: The client should first contact the IA using the details on its website or following
contact details:
(IA to Provide details as per ‘Grievance Redressal / Escalation Matrix’)
Step 2 : If the resolution provided by IA is unsatisfactory, the client can lodge grievances
through SEBI’s SCORES platform at www.scores.sebi.gov.in
Step 3: If the client remains dissatisfied with the outcome of the SCORES complaint, the
client may consider the Online Dispute Resolution (ODR) through the Smart ODR portal
at https://smartodr.in
13. The SEBI registration, enlistment with IAASB, and NISM certification do not guarantee
the performance of IA or assure returns to the client.
14. Clients are required to keep contact details, including email id and mobile number/s
updated with the IA at all times.
15. The IA shall never ask for the client’s login credentials and OTPs for the client’s Trading
Account, Demat Account and Bank Account. Never share such information with anyone
including IA.
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