One of our readers has written to us with this query:
Whether MFD and RIAs can float insurance marketing firms and charge commission on insurance policies. Also, please clarify if ARN/RIA holders are eligible to become IMF.
Raja V
Dear Raja,
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 RIAs, there is no such guidelines from SEBI. While RIAs are not allowed to charge commission from clients, it is largely restricted to products where direct plan option is available. However, you need to record and disclose to client about the remuneration involved. It is advisable to take written consent from clients before distributing insurance policies.
Since you would like to float an insurance marketing firm (IMF), you will have to obtain license from IRDAI.
IMFs are allowed to sell insurance policies of two life, two general and two standalone health insurers. In addition, you can sell other financial products like mutual funds and pension products by floating an IMF, subject to respective regulatory approval.
If you have individual agency license currently, you will have to surrender agency license and pass an examination to get IMF license.
You will have to appoint a principal officer to float an IMF. The principal officer should have at least graduation degree with five years of experience in financial services or two years in insurance business. MBA, CA and CS are also eligible to float IMF without any experience.
You can get more information on imf.irda.gov.in.
