In its response to the consultation paper floated by SEBI last month, Bangalore based Council of Financial Planners has suggested to the market regulator that small distributors should be exempted from complying with the RIA regulation.
In a letter sent to SEBI, COFP has recommended that distributors having assets under advisory of less than Rs.5 crore should be exempted from complying with RIA norms. COFP believes that this move will attract new distributors and increase the penetration of mutual funds. “The current mutual fund distribution channel has done a great job in reaching out to the small Investors. We suggest that norms should be relaxed until a certain threshold (say 5 crore AUM) so that new intermediaries are encouraged to take up the profession,” said COFP.
Among other key recommendations are:
- Uniform commission structure across AMCs to reduce the scope of conflict of interest in distribution services.
- Creation of separate distribution arm would increase the cost substantially especially for boutique RIA firms. Such firms should be allowed to keep distribution services under the same company with a separate department.
- Formation of SRO should be expedited.
- Allow RIAs to provide execution services in direct plans.
- Reverse feeds should be made easily available for RIAs.
- Registration cost for boutique RIA firms should be reduced to Rs. 10,000 per adviser with net worth requirement of Rs.1 lakh. In addition, registration fee could be charged annually instead of a onetime fee for 5 years.
- A clear regulatory roadmap will help all stakeholders plan better and make right investments.
- Introduction of direct plans in PMS and AIFs to create level playing field.
- Mass awareness campaign should be launched to make people aware of fee based advisory services.
- Proactive efforts to raise the profile of RIAs by giving them more teeth like introducing prescription based investments. Complex products like derivatives which are available freely should be put under the purview of prescription based investments.
Also, COFP has requested SEBI to focus on development of the industry and facilitate ease of doing business to intermediaries.
COFP is a non-profit organization to help promote the interest of CFPs in India with policy makers and regulators.
