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of <h1>SEBI's Authority to Regulate Investment Advisor Fees Upheld</h1> <h3>Purnartha Investment Advisers Private Limited Versus Securities and Exchange Board of India & anr.</h3> Purnartha Investment Advisers Private Limited Versus Securities and Exchange Board of India & anr. - [2021] 227 Comp Cas 374 (Bom) Issues Involved:1. Constitutional validity and vires of Regulation 3(XII) of the SEBI (Investment Advisors) (Amendment) Regulations, 2020.2. Authority of SEBI to make regulations concerning fees to be charged by Investment Advisors.3. Alleged breach of the fundamental right to practice a profession or business of choice due to the restrictions imposed by the Amendment Regulations and Circular.4. Interpretation of SEBI Act provisions concerning SEBI's regulatory powers.5. Analysis of relevant case laws cited by the Petitioner.Detailed Analysis:1. Constitutional Validity and Vires of Regulation 3(XII) of SEBI (Investment Advisors) (Amendment) Regulations, 2020:The Petition challenges the constitutional validity of Regulation 3(XII) which introduces Regulation 15A into the SEBI (Investment Advisors) Regulations, 2013. The Petitioner argues that SEBI lacks legislative power to enact such a regulation or issue the Circular dated 23.09.2020, which prescribes modes of charging fees by Investment Advisors. The Petitioner contends that these measures breach the fundamental right of Investment Advisors to carry on their profession by imposing unreasonable restrictions.2. Authority of SEBI to Make Regulations Concerning Fees:The SEBI Act, 1992, under Section 11, grants SEBI the duty to protect investors' interests and regulate the securities market. Section 11(2) specifically includes the power to regulate the working of Investment Advisors and levy fees. The Court notes that SEBI's powers under Section 11 are broad and open-ended, allowing for various measures to protect investors and regulate the market. The Court references Supreme Court judgments, which affirm that SEBI's regulatory measures can include provisions for fees charged by Investment Advisors.3. Alleged Breach of Fundamental Right to Practice Profession:The Petitioner claims that the Amendment Regulations and Circular infringe on their fundamental right under Article 19(1)(g) of the Constitution to practice their profession. The Court finds that the impugned Regulation and Circular do not prohibit the profession but impose reasonable restrictions necessary for investor protection and market regulation. The Court emphasizes that prescribing fee structures and ceilings are reasonable measures within SEBI's regulatory mandate.4. Interpretation of SEBI Act Provisions:The Court examines Sections 11, 12, 19, and 30 of the SEBI Act. Section 30(1) empowers SEBI to make regulations consistent with the Act to carry out its purposes. Section 30(2) provides illustrative measures, including conditions for registration certificates under Section 12. The Court concludes that SEBI's power to regulate Investment Advisors encompasses the authority to specify fee structures and ceilings.5. Analysis of Relevant Case Laws:The Court distinguishes the present case from several cited judgments:- Petroleum and Natural Gas Regulatory Board Vs. Indraprastha Gas Limited: The Court finds this case inapplicable as it dealt with the regulation of retail prices, whereas SEBI's regulation concerns professional fees within its delegated authority.- Narinder S. Chadha Vs. Municipal Corporation of Greater Mumbai: This case involved municipal licensing conditions conflicting with a central statute, which is not analogous to SEBI's regulatory framework.- Cellular Operators Association of India Vs. TRAI: The Court notes that the impugned regulation in that case did not align with the empowering statute's purpose, unlike SEBI's regulation, which aligns with its statutory duties.- Ahmedabad Urban Development Authority Vs. Sharadkumar Jayantikumar Pasawalla: The Court clarifies that SEBI's fee regulation is not a fiscal measure but a regulatory one, within its delegated powers.- Institute of Chartered Accountants of India Vs. K. Bhagvatheeswaran: The Court distinguishes the traditional professions of lawyers and chartered accountants from the regulated business of Investment Advisors, affirming SEBI's authority to impose fee regulations.Conclusion:The Court dismisses the Petition, upholding the constitutional validity and vires of Regulation 3(XII) of the SEBI (Investment Advisors) (Amendment) Regulations, 2020, and the Circular dated 23.09.2020. The Court concludes that SEBI has the requisite authority to regulate the fees charged by Investment Advisors, and such regulation does not violate the fundamental right to practice a profession. The Petitioner's challenge lacks merit, and the imposed fee structures and ceilings are deemed reasonable and necessary for investor protection and market regulation.
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