2 Apr 2025SEBI Master Circular for Investment Advisers
Advance fee cap for IAs relaxed from one quarter to one year
SEBI extended how far in advance an IA can collect fees from individual/HUF clients to a full year (from one quarter). On early termination, the client is refunded the unexpired-period fee, minus a breakage fee the IA may retain of up to one quarter's fee.
From the circular
View source document →“If agreed by the client, IAs may charge fees in advance, however, such advance shall not exceed fees for a period of one year. In the event of pre-mature termination of the IA services in terms of agreement, the client shall be refunded the fees for unexpired period. However, IA may retain a maximum breakage fee of not greater than one-quarter fee.”
In practice
An IA can now bill an individual client a full year of advisory fees upfront (say ₹1,00,000) instead of the earlier one-quarter limit. If the client terminates after 4 months, the IA refunds the unexpired 8 months' fee, but may retain a breakage fee capped at one quarter's worth.
Illustrative scenario written by Northspread — not text from the circular itself.