The securities market regulator’s recent proposal to distinguish between mutual fund distributors and investment advisors appears premature at best, and misdirected at its worst, say distributors.
Last week, the Securities and Exchange Board of India (SEBI) said it wants to bring in rules that will clearly differentiate between distributors of mutual fund products, who earn commissions from a mutual fund company, and registered investment advisers (RIAs), who earn their fees from investors who buy products based on the advice given to them. To this end, the Securities and Exchange Board of India (SEBI) published a consultation paper on Friday, proposing amendments to the SEBI (Investment Advisers) Regulations, 2013.
According to the new proposals, mutual fund distributors will no longer be allowed to provide incidental or basic investment advice on any mutual fund schemes they sell, unless they register separately with SEBI as investment advisers as well. They will be given three years to become advisers and until then, will have to refer to themselves as only “mutual fund distributors” and not as “wealth/financial advisers”.
