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  • MF News AMCs want clarification on RIA license for their advisory services

    AMCs want clarification on RIA license for their advisory services

    Advisory services under AMCs include onshore and offshore advisory services where fund managers provide investment advisory services to their clients.
    Nishant Patnaik Dec 3, 2016

    AMFI, in its recommendation letter sent to SEBI on the RIA consultation paper, has sought clarification from the market regulator on whether they will have to register under RIA regulations to provide onshore and offshore advisory services.

    AMFI has said, “A necessary clarification may please be issued that an asset management company (AMC) which is acting as an investment manager to mutual funds, will continue to be exempt from registration under SEBI (Investment Advisers) Regulations, 2013 while drafting the regulations.”

    SEBI, in its consultation paper, has proposed to make RIA registration mandatory to provide investment advisory services.  “All the persons engaged in financial planning services shall mandatorily be required to register themselves as investment adviser. Exemption  shall   be  applicable  only   to  the  persons  carrying  out investment  advisory  activities  which  are  permitted  under  any  other regulations specified by SEBI such as merchant bankers registered with SEBI  can  render  corporate  advisory  services,  etc., and to  the  persons providing  advice  only  on  insurance  products  regulated  by  IRDA, pension products regulated by PFRDA, etc.,” said SEBI.

    Typically, an AMC acts as investment manager to mutual funds and undertakes other activities like PMS, advisory service which includes onshore and offshore advisory where fund managers provide investment advisory services to their clients. For many AMCs, offshore advisory services is an integral part of their revenue which contributes significantly to their profits.

    “AMCs are product manufacturers and will always be involved in promoting and marketing only their own products to investors/Mutual Fund Distributors/ RIAs. AMCs and their employees cannot be held to be independent or unbiased advisors, as they would always undertake activities towards promotion and sale of their own products, services and solutions,” said AMFI.

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    2 Comments
    Prashant · 7 years ago `
    Haha.....this is just an eyewash. Will AMC must keep an arm's length distance between advisory and distribution. Will they and will SEBI make them do that? Also all individual employees should be RIA and not the fund house because they are the ones who will be advising. What about direct plans? They are distributing direct plans directly to investors. Will they advise schemes of other fund house? How can one trust them even if they are RIA since they will only recommend their own schemes only? The doubt on IFAs was because we are or were biased. What about AMCs, will they be neutral? In fact they should not be allowed to sell their products because there is a lot of wasted interest involved in this. Also Close ended funds were manufactured by AMCs only and passed by SEBI. Both are innocent but just because few IFAs sold them we are criminals? This is the only product in which manufacturers are spared and sellers are punished. And manufacturers are actually rewarded by bringing RIA model so that they can make more money. And now they will be rewarded by giving them RIA license eventhough they are selling.


    ganesh Kumar Gupta · 7 years ago `
    Until & unless a level playing field is created with insurance agents, the IFA converting to RIA is meaningless. If it is forced, in future all IFAs shall become insurance agents leaving behind scores of clients at the mercy of AMCs.
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