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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Key Regulations

A registered investment adviser charges fees on a fixed basis. Mr. Iyer, a client, has been charged an annual fee of ₹1,80,000 for a family of one client. Assuming the regulatory ceiling under the fixed fee mode is ₹1,51,000 per family per annum (as stipulated by SEBI at present), what is the minimum amount by which the fee exceeds the ceiling, and what is the correct regulatory position?

The fee exceeds the ₹1,51,000 ceiling by ₹29,000 (1,80,000 minus 1,51,000). Under the fixed fee mode the limit per family per annum cannot be exceeded even with the client's written consent, so the charge is not permitted.

  1. AExcess of ₹29,000; fee is not permitted beyond the ceiling in fixed fee modeCorrect
  2. BExcess of ₹29,000; allowed since client consented in writing
  3. CExcess of ₹39,000; fee is not permitted beyond the ceiling
  4. DNo excess; the ceiling applies only to AUM-based fees

Explanation

Excess = 1,80,000 − 1,51,000 = ₹29,000. The ceiling on fixed fee per family per annum applies irrespective of client consent, so the fee is not permitted. A ₹39,000 excess comes from a subtraction error, and the ceiling does apply to fixed fees.

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