CeFCoM

When a client pays an Investment Adviser's fee directly, there is always some risk of a dispute later — did the client actually pay, and how much? SEBI created an optional, centralised channel to make this payment cleaner and better documented.

This channel is called CeFCoM, the Centralized Fee Collection Mechanism. A client who chooses to use it pays the adviser's fee through this system rather than by a private transfer, and the payment is recorded by a recognised, independent body.

CeFCoM is managed by BSE Limited, which currently also acts as the recognised Investment Adviser Administration and Supervisory Body (IAASB) for SEBI. Using CeFCoM is optional for the client — an Investment Adviser's fee can still be paid through any of the other specified modes, such as cheque, online bank transfer or UPI. What is never allowed, whether or not CeFCoM is used, is payment of an adviser's fee in cash.

Because BSE, as IAASB, already administers and supervises Investment Advisers under SEBI's regulations, routing fee payments through the same recognised body gives both the client and SEBI a documented, independent record of what was actually paid, separate from the adviser's own books.

Kavita engages a SEBI-registered Investment Adviser for a comprehensive financial plan, agreed at a fee of Rs 25,000. Instead of transferring the money directly to the adviser's bank account, Kavita chooses to pay through CeFCoM, the centralised mechanism managed by BSE Limited.

The Rs 25,000 payment is processed and recorded through this SEBI-recognised channel. If a dispute ever arose about whether or when Kavita paid, CeFCoM's independent record, rather than only the adviser's own account statement, would confirm it, giving both Kavita and the regulator a documented, third-party trail of the transaction.

Chapter 17 (Operational Aspects of Investment Management), in the model agreement clauses for Investment Advisers, names CeFCoM as the optional centralised fee payment channel, managed by BSE Limited as the currently recognised IAASB. Expect a question that asks what CeFCoM is, who manages it, or what payment methods, cash included, are and are not permitted for an adviser's fee.

• Using CeFCoM is optional, not mandatory — a client may still pay an adviser's fee through cheque, online transfer or UPI without going through CeFCoM.
• Cash payment is never allowed for an Investment Adviser's fee, whether or not CeFCoM is used — this is an absolute rule, not something CeFCoM alone enforces.
• CeFCoM is run by BSE Limited in its capacity as the currently recognised IAASB, the same body that administers and supervises Investment Advisers, not a separate SEBI department.