MF News MFDs to be required to give their clients details of products not offered by them

MFDs to be required to give their clients details of products not offered by them

SEBI is said to have received suggestion on restricting MFDs from making comprehensive financial planning for their clients.

Nishant Patnaik Mar 19, 2020

SEBI is likely to ask mutual fund distributors to give their clients an option to explore alternate products, which are not being distributed by them before making investment decision, said two members of working committee constituted by SEBI on the registered investment adviser (RIA) regulations.

One of the members said, “In the best interest of the investors, SEBI may ask MFDs to explain about the schemes distributed by them and also inform them about the availability of other alternate products not offered by them.”

Currently, RIA regulations allow MFDs to explain the features of products and ensure appropriateness of products sold to the client. Appropriateness is defined as selling products that are best suited for the client.

Further, SEBI may ask MFDs to disclose the list of mutual funds they are affiliated with and the information provided to clients is restricted to the mutual fund products distributed by them.

Another suggestion to SEBI is that MFDs should not be allowed to make comprehensive financial plan for their clients.

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14 Comments

K v raghupathi · 4 years ago `

Imagination to regulate MF Distributors seems no boundaries;

We expect the author of this wild idea - the gentleman visits a vegetarian Udupi Brahmin hotel, expect the owner to list out what he is to offer like idli, vada, dosa etc., Also he need to explain that he is not to serve dishes like chicken 65, mutton biriyani etc.,

Normally the customer before entering the food court clearly comes with an idea of what is available there.

For everything there should be a limit. Sensex down 30%, investors came through Mutual Fund Sahi Hai are undergoing terrible stress and gentlemen setting in AC chambers are making fun of themselves by these wild ideas. Let good sense prevail upon them before this become one more rule (tool) to regulate us.

Days are not too far off the distributors migrate to respectable alternative profession.

K Kannan · 4 years ago

Well said...

venukumar · 4 years ago

The MFD would also need a list of Products to be explained and yes to ensure uniformity across all such interaction with the clients, they would also need a script.

Mangesh Rajhansa · 4 years ago

Well said.Yhese SEBI useless officers expects that mutual fund business will run many folds..Forget it..now investors understands even after struggling for 3-4 years portfolio returns are either neagtive or max 3% , initially they have reduced TER, saying that investor will get benefited, then reduced commission drastically, and now with BS VI reasons, Corona, and other factors valuation is horrible.

Even if Tendulkar and Dhoni does advt.people are not interested bto put their money in market especially mutual funds...

Bewakoof bana diya....

MFG · 4 years ago `

This is beyond bizarre. It's scary to think that these minds affect millions of stakeholders, this is a bubble that will not survive long. You can fight for their defence in other cases, no matter how weak the defence but how this can be defended is beyond my understanding. When there is logic no matter how minuscule, you don't mind hearing the other person out but this is mere gambling (how ironic !)

As the individual above me as put it aptly, it's like walking into a veg restaurant and having to be told you do not offer chicken biryani. The customer walking in knows what he's getting into.

This is no more about investor protection or wider interests but has rather crossed the line where integrity is being questioned each day via new means, this is no longer about finances but rather self respect.

Praful · 4 years ago `

I think given knowledge and guidance to client about alternate product is the job of advisor.
Then why SEBI has removed the tag IFA for MFD

Ranjan · 4 years ago `

This is a matter of pity that SEBI always targeting distributors. I must ask sebi whether it is possible to give the details of all schemes which distributors are not recommending. Altogether there are more than 700 schemes. Then I request SEBI to increase trail commission to 2%. Because to get one investment it may take 10 days time

Nishith · 4 years ago `

This is getting absurd day by day. If MFD is not allowed to advise on any other product than how can s/he list down the alternate products? I am sure if s/he lists the alternate products, the client will ask him or her about them in detail which is the same as advising, no? What should be the answer from the MFD then? No sir I am not allowed to speak on them, I can just list them. Will 100% lose the client there and then. So MFD will be losing clients if they are going to comply with regulations. Bravo SEBI.

Dipak Doshi · 4 years ago `

Very funny. One one hand sebi wants mf distributors to sell only mf products only and on other hand sebi also expects them to have knowledge/proficiency in othet investment alternatives. What a great regulator!!!!

Satya Kolluru · 4 years ago

No point in being critical about SEBI’s irrational ideas and ruies as they have no idea on how IFA fraternity helped the MF industry to grow to this level, like in case CA institute we have to have a strong body to represent IFAs and probably taking a legal course to fight these kind of irrational and ill conceived ideas of the regulatory. If we don’t show our might we will be further weakened for sure

Ashoke Kumar Basu · 4 years ago `

Dear SEBI, please try to understand the ground level reality of investment scenario in a country like India instead of throwing stones in the dark...

Sujatha . A. · 4 years ago `

This is the height of brutality. The question arises if this nation really needs MFD's.
As my friends have opined there is already a down turn in the returns given by MF and talking and substantiating the ground realties takes ones time and energy to keep the investor stay PUT during difficult times.

Time is not far away that we as advisors will look for alternative business. In a way the so called Endowment plans & ULIPs will be the alternative investment for the common man

Srinivas · 4 years ago `

Most absurd & regressive, mindless rule, to say least,can only be framed by people sitting in ivory towers!! one's fundmental right- 'Right to work' is at Risk

Sanjay Chaturvedi · 4 years ago `

The problem is multifold, while the payouts are already like peanut the offer for direct plans on almost every website is making investors smarter than they used to be some time back. The example given above of serving Idli, dosa in a south indian restaurant is perfect. The RMs in some of the funds behave so sarkari type that the MFD has to decide on the quality of service the AMC can provide. Even the apps and websites of all the mutual funds are not equally suitable to the needs. Also, the customer has become so fussy about the services that it is already a hard task for the MFD at least at the starting stage to satisfy the customer. And now, if SEBI expects the MFD to be well aware of all the products around 30 AMCs are offering, it would be a surprise.

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