In its response to the consultation paper floated by SEBI last month, United Forum has vehemently opposed the proposed amendments to SEBI investment adviser regulations.
In a press release, the forum has said that the absence of a large distribution network will see household savings once again shift to unproductive physical assets like gold and result in a drastic fall in the reach of mutual fund products to households across the country, especially in B15 towns. ‘’The role of distributors is very important in educating and penetrating the retail customer base, which needs help guidance and service. Without proper regulatory structure, financial inclusion would be compromised,’’ the representation said.
“Further, lay retail investors who have been slowly accepting mutual funds and especially MF SIPs as an alternate investment avenue to secure their financial future, and in the process to reap benefits of India growth story, will be orphaned on their portfolios. In addition, the new investors who possibly could have been brought into the arena, will not be able to be brought into the MFs,” says the spokesperson for United Forum.
Currently, there are approximately active 46,000 ARN Holders in a population of 130 crores. The proposals if implemented would force a considerable proportion of the distributor community, at least 80-90 % out of the distribution business, claims United Forum.
The nature of work of distributors entails an advisory component. United Forum believes that the essence of incidental advice is very important for any financial distribution activity, lest the product have harmful effects on the investor, the representation states.
“It may appear that making registration under the IA Regulations mandatory, for all mutual fund distributors providing incidental advice, would help SEBI regulate them better, but in reality such a measure would not only unreasonably disrupt the activities of distributors but also end up compromising financial inclusion, as it would also be against the interests of investors,” the representation added.
United Forum is the forum of several national, local and regional associations of distributors. It comprises large associations like FIAI, FIFA and 43 other regional IFA associations.
