SEBI Slaps ₹1 Lakh Penalty on RIA After Alleging Overcharging of Advisory Fees

SEBI Slaps ₹1 Lakh Penalty on RIA After Alleging Overcharging of Advisory Fees​

SEBI has issued a significant adjudication order penalizing Dwaith Advisory Private Limited for alleged violations concerning the fee structure charged to an investment client. The regulator found that the advisory firm charged fees significantly above the prescribed limits set by SEBI regulations.

The order underscores SEBI’s strict vigilance over compliance standards within the investment advisory sector, particularly concerning the accurate classification of clients under accreditation frameworks.

SEBI Adjudicates Breach of Advisory Fee Norms​

The Securities and Exchange Board of India (SEBI) conducted an investigation into Dwaith Advisory Private Limited (Noticee) concerning the scrip of Rail Vikas Nigam Ltd. (RVNL). The inquiry period covered December 15, 2023, to February 20, 2024.

The investigation found that the Noticee violated various provisions of the SEBI (Investment Advisers) Regulations, 2013, and associated circulars. The core allegation centered on the firm charging fees that exceeded the permitted limits under established guidelines.

Controversy Over Advisory Fees and Client Status​

The Show Cause Notice (SCN) dated February 04, 2026, accused the Noticee of charging fees beyond the limit specified in SEBI Circular SEBI/HO/IMD/DF1/CIR/P/2020/182 dated September 23, 2020.

The prescribed fee limits dictated that fees charged under the Assets under Advice (AUA) model could not exceed 2.5 percent of AUA per annum per client. However, the investigation revealed that the Noticee charged a fee of 10.21% of AUA, leading to excess fees of ₹52,32,523/-.

Noticee Defends Fee Structure as Accredited Investor Terms​

During the proceedings, the Noticee argued that the fee arrangement was governed by bilateral contractual terms. They pointed to the SEBI Circular dated December 21, 2021, which suggests that the limits for fees payable to an Investment Adviser may be set via negotiated contracts for accredited investors.

The Noticee stated that at the time of invoicing, the client, Mr. Sunil Thamaran, had investments exceeding ₹11 crore, placing him above the required net-worth threshold for an accredited investor.

Regulator Rules Out Accreditation Defense​

Despite the Noticee’s submissions regarding the client's high net worth and contractual agreements, the Adjudicating Officer reached a different conclusion. The officer established that the Noticee charged fees for the period of October 2023 to June 2024, a time when Mr. Thamaran was not yet registered as an accredited investor, even though he received that status later.

The ruling noted that the inability to establish the client's accreditation status at the time of the default solidified the finding of non-compliance. The Noticee was ultimately found to have violated Clause 2(iii) of the SEBI Circular SEBI/HO/IMD/DF1/CIR/P/2020/182.

Penalty Imposed for Non-Compliance​

In its final order dated May 13, 2026, the Adjudicating Officer determined that the violation attracted a penalty under Section 15EB of the SEBI Act, 1992.

Considering the facts, the Adjudicating Officer imposed a penalty of ₹ 1,00,000/- (Rupees One lakh only) on Dwaith Advisory Private Limited.

The Noticee must remit the penalty amount within 45 days of receiving the order. Failure to comply may result in SEBI initiating consequential actions, including recovery proceedings, against the firm.