Rajiv Bajaj - Director, Financial Intermediaries Association of India (FIAI) and Neeraj Choksi, Charter Member, FIAI discuss with Cafemutual the association’s plans on forming SRO.
What was the thinking behind getting FIAI sponsored Organisation of Financial Distributors (OFD) to apply for SRO?
Rajiv Bajaj: The trade body Financial Intermediaries Association of India (FIAI) is the only body representing the distributors of mutual funds and other financial products across all segments. The members best understand the issues related to distribution and are best placed in coming out with best practices and finding out gaps in distribution and protect the customers from unfair trade practice. FIAI realised that it is best that a distribution body takes up the initiative and the onus of applying for the SRO as a body which can create a rule framework, govern and self-regulate its own members under guidance of SEBI.
How do you rate the chances of Organisation of Financial Distributors (OFD) to get SRO status from viz-a-viz other SRO applicants? What are the strong points of OFD in getting SRO status from SEBI?
- RB: It is the only applicant which is the true representation of the distribution fraternity. As the name suggests “Self-Regulatory Organisation” OFD is the only entity promoted by a body of distributors (self).
- We are very well prepared with a plan of execution to address various challenges
We have many plans and ideas that seek to ensure penetration & meaningful Industry growth of mutual funds:
- Investor education
- Investor protection from unfair trade practice
- Professionalization of distributors
- Technology shall be extensively used to connect with various stake holders viz, customers, distributors etc.
- Also an extensive offline network in smaller towns and cities shall be created where a customer or a distributor can easily connect and communicate.
- We have created an advisory board of independent eminent people with a vast experience in this field to act as a sounding board and helping out carve best practices.
Is the proposed SRO meant to cover all distributors or just the SEBI registered Investment Advisers?
RB: It is meant for covering mutual fund distributors only.
Advisers/distributors deal with a variety of investment products? Will the proposed SRO cover all of them or just mutual funds?
RB: No, just mutual funds.
If it is only MFs, what if it comes out that an adviser has given improper advice on other products?
Neeraj Choksi: The concerned regulator shall take care of the same.
What kind of punitive powers will the SRO have? What kind of penalty can SRO impose on distributors? Will there be tougher rules for distributors from what we have currently (suspension of ARN)?
NC: The SRO shall come out with an action plan for protecting customer’s interest and handling their grievances. Once the regulator approves the same the SRO shall posses such powers.
FIAI is so far a body of national distributors and banks. How will an IFA in, say, Kohima have the confidence that FIAI sponsored Organisation of Financial Distributors (OFD) will conduct self-regulation that is fair and equitable to all categories of distributors?
NC: Both FIAI and OFD are independent entities and shall have completely different management. The board of OFD shall be approved by SEBI which shall ensure that there is an equitable representation from all the segments of the distribution community. FIAI will continue to be the trade body at an arm’s length.
What will be the composition of the board of directors of SRO?
NC: The composition of board is already defined under the SRO rules 2004 and there shall be 5 independent directors from SEBI as per the regulations.
