There have been a number of amendments proposed to SEBI (Investment Advisers) Regulations 2013 in the recent consultation paper of the Securities and Exchange Board of India that does not augurs well for mutual funds, distributors as well as advisors. The consultation proposes that mutual fund distributors should not engage in providing any financial planning services that requires financial goal setting, risk profiling etc. Only what they can do maximum is describe the features of the product without resorting into providing any investment advice.
To curb the large-scale mis-selling of the product, the regulator has stipulated that the selling activity should be segregated from the advising activity.
So, with the implementation of such a proposal, distributor shall only be allowed to sell mutual fund offerings while adviser would only advise and shall not be in a position to sell mutual funds.
Also, mutual fund distributors are asked to avoid using 'Financial Adviser' or 'Independent Financial Adviser' and instead use the term 'Mutual Fund Distributor'.
Another proposal in the consultation paper which has not received approval from the distributor community is the requirement that calls for a signature on a form before making any investment decision which states that he or she may be not be acting in the best of investor's interest. The proposal shall put distributors at a disadvantage in comparison to RIAs (registered investment advisers).
Only banks, NBFCs and other body corporates as laid down in the proposal can start a new division or department for providing executive services. For providing investment advice, a separate subsidiary has to be rolled-out. No customer can be pressurized for availing executive services from bank or any such firms.
For corporate applicants the application fees for the first 5 years has been reduced from Rs. 25,000 to Rs. 10,000. The registration fees has also been slashed from Rs. 5 lakh to Rs. 1 lakh. After the initial registration, the fee to provide services as an investment advisor remains Rs. 5 lakh. For the proposals, the regulator has sought public comments before July 14, 2017.