The Securities and Exchange Board of India (SEBI) has provided clarification regarding the organizational positioning of Compliance Officers within listed companies. According to SEBI’s latest circular, the Compliance Officer must report directly to the Managing Director (MD) or Whole-Time Director(s) who are part of the Board. In scenarios where such directors are absent, the Compliance Officer should be positioned no more than one level below the Chief Executive Officer (CEO), Manager, or any other individual responsible for the company’s day-to-day operations. This directive aims to ensure that Compliance Officers hold a significant and influential role within the corporate hierarchy, emphasizing the importance of compliance functions in corporate governance.
This clarification follows amendments introduced through the Third Amendment Regulations, 2024, which mandate that Compliance Officers be in full-time employment with the listed entity, occupy a position one level below the Board of Directors, and be designated as Key Managerial Personnel (KMP). These measures are designed to strengthen the compliance framework within organizations by ensuring that Compliance Officers have adequate authority and proximity to top management, thereby facilitating more effective oversight and implementation of compliance policies.
In a separate development, SEBI has extended the deadline for finalizing implementation standards aimed at enhancing the safety of retail investor participation in algorithmic trading. Initially set for April 1, 2025, the deadline has been moved to May 1, 2025, to allow for further discussions and ensure smooth implementation without disrupting market operations or investor interests.
SEBI Relaxes Advance Fee Restrictions for Investment Advisers and Research Analysts
On April 2, 2025, the Securities and Exchange Board of India (SEBI) issued a circular easing the restrictions on advance fee collection by Investment Advisers (IAs) and Research Analysts (RAs). Previously, IAs were permitted to charge advance fees for up to two quarters, while RAs were limited to one quarter. With the new relaxation, both IAs and RAs can now collect advance fees for a period of up to one year, provided the client agrees. This change aims to address concerns that shorter billing cycles discouraged long-term investment strategies and imposed logistical challenges on both advisers and clients.
To safeguard investor interests, SEBI mandates that in cases of premature termination of services, IAs must refund fees for the unexpired period, though they may retain a breakage fee of up to one quarter’s fee to cover onboarding costs. RAs are required to refund the proportionate fees for the unexpired period without charging any breakage fee. Additionally, these fee-related provisions apply specifically to individual and Hindu Undivided Family (HUF) clients; for non-individual clients, accredited investors, and institutional investors seeking proxy advisory services, fee structures will continue to be governed by bilaterally negotiated contracts.
SEBI Cracks Down on Unregistered Investment Advisers: ₹8.1 Crore to be Refunded, Market Ban Imposed
The Securities and Exchange Board of India (SEBI) conducted an investigation into the activities of six partnership firms following complaints received between April 2018 and September 2019. The probe revealed that these firms, are operated by few individuals, who were offering investment advisory services without the necessary SEBI registration. During this period, they collected approximately ₹8.1 crore from 4,536 clients for their unregistered services.
In response to these violations, SEBI issued an order on April 2, 2025, imposing several sanctions on the nine entities involved. They are required to refund the collected ₹8.1 crore to their clients within three months and have been banned from accessing the securities market for a minimum of two years or until two years after the completion of the refunds, whichever is later. Additionally, a total penalty of ₹18 lakh has been levied, payable within 45 days. Furthermore, the three individuals have been prohibited from serving as directors or key managerial personnel in any listed public company for two years.
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