One of our readers wrote to us with this query:
As per new regulations, we are not supposed to be called as IFA or any other similar name.
My question is, can a MFD sell multiple products like insurance, bonds, stocks, FDs, P2P lending and other financial products for commission and still not register as a RIA or is it compulsory for someone dealing with multiple products to be a RIA.
Muralidhar, MFD from Bangalore
Dear Murali,
There is no regulation that stops mutual fund distributors from selling other financial products like insurance, bonds and NPS subject to approval of respective regulators.
While mutual fund distributors are no longer allowed to use nomenclature like ‘independent financial advisers’ (IFAs), ‘wealth managers’ and any other name without registering with SEBI as RIA, there is no restriction on MF distributors to sell other financial products.
While you will have to take separate license to distribute other financial products, you can distribute AIFs and PMS with your existing ARN.
Currently, mutual fund distributors or individuals who have cleared NISM Series VA exam can become distributors of AIFs and PMS.
For insurance, you will have to obtain agency license from IRDAI. However, agency license does not allow you to work with multiple insurers.
Ideally, you should become point of sales representatives (PoSPs) for insurance brokers to sell policies of multiple insurance companies. Many MF distributors have become point of sales representatives with insurance brokers like BSE Ebix and NJ India to offer insurance policies of multiple insurance companies.
Further, you can distribute NCDs, tax free bonds and government securities by obtaining agency code from the issuers or the banks. For instance, if you want to distribute 7.1% taxable bonds, you will have to secure agency license from one of the nationalized banks by giving your bank details, PAN card, Aadhaar, agency application form and your existing ARN or IRDAI agency license. However, you will end up obtaining multiple licenses. Hence, it is better to become sub broker with national distributors like NJ India, Prudent Advisory, JM Financial and so on.
You can also distribute loans and peer-to-peer lending products by tying up with NBFCs and peer-to-peer lending platforms, respectively. There will be no separate exam to distribute these products.
Finally, you need to obtain a passing certification from NISM and apply for the retirement adviser license with the PFRDA to distribute retirement solutions like NPS.
