A committee on investor awareness and protection has recommended common minimum standard for distributors across all financial products.
A report on investor awareness and protection called ‘Financial Well-Being’ has recommended the setting up of a self-regulatory organization (SRO) to establish a system of common minimum standard for the distributors across all financial products.
The report recommended the establishment of Financial Well-Being Board of India (FINWEB) which will have two cells – Financial Literacy Cell (FLC) to create financial awareness and the Self-Regulatory Organisation (SRO) Cell to bring financial advisors under common standard.
Earlier in 2009, Ministry of Finance had constituted a seven-member committee headed by Dhirendra Swarup, Former Chairman of PFRDA, to re-examine the issue of regulating investment advice for investor awareness and protection. The committee had submitted its recommendations to the finance ministry four years ago; however, the report was put up recently only on the Ministry of Finance website.
The report stresses the need to establish single SRO for the distributors of financial products like mutual funds, insurance, pension funds etc. “There should be a common minimum standard for all sellers and advisors on mutual funds, insurance products, pension products and those products of commodities markets which are purely financial in nature. Pro-bono advice will not be under the purview of Finweb.”
The organizational structure of Finweb should have representatives from government ministries, department, regulators, industry association, independent entities, experts and academicians, the report recommended.
Other key recommendations
- Reduce or abolish upfront commission embedded in the premium payment
- For fee based advisers, Finweb will set fees in a price band linked to service provided
- System of education for employees or sales team of financial advisors
- The disclosures should reveal the income that an adviser earns from the sale and maintenance of a product
You can read the report here.
