A Finance Ministry committee has recommended the creation of a single agency to regulate distributors across all financial products like mutual funds, insurance and NPS in order to curb mis-selling. This proposed agency is expected to regulate and grant license to distributors and redress sales related complaints of investors.
The Union Finance Ministry has constituted a nine-member committee headed by Sumit Bose, former Union Finance Secretary to review distribution incentives across financial products, rationalize commission structure and recommend measures to curb mis-selling in November 2014. The committee has submitted its report to finance ministry in August which was made public on September 3.
Further, the committee has recommended that this agency should oversee broader and uniform guidelines for distributors of all financial products. However, the financial regulators like SEBI, IRDAI and PFRDA can add specific rules to the products regulated by them. Also, the committee has suggested that this agency should facilitate registration and grant license to all distributors.
Explaining the rationale behind this recommendation, the committee, in its report, said, “Distributors often get regulated by more than one regulator. This creates confusion as to which regulator actually has oversight on the sales process. Similarly, there are multiple forums that have jurisdiction over mis-selling and consumer protection matters and the applicable forum depends on the financial product mis-sold. These forums have different capacities and processes. Redress capacities at different regulators have also evolved differently.”
Meanwhile, the committee has recommended introduction of unique identification number for distributors just like EUIN in mutual funds. The committee has said, “Anybody facing the customer should be registered. The registry should identify each individual distributor with a unique number. The registry should have the past history of regulator actions and awards for each individual distributor. Strict penalties should be defined for distributors who are not registered.”
EUIN or Employee Unique Identification Number is a unique seven digit alpha numeric number assigned to the employees of distributors which was introduced by SEBI to tackle mis-selling. EUIN is allotted to employees/salespersons/relationship managers giving advice to clients in banks and other distribution firms.
