MF Distributor’s Feedback on RIA’s Consultation Paper

After changing “Name of entity / person / intermediary/ Organization*”and “Advisor Name” with your name and “ARN-xxxxxx” with your ARN No.

Email this draft to:
sebiria@sebi.gov.in
Before 4th Nov. 2016 

Email SUB: Feedback on RIA’s Consultation Paper

Dear sir \ Madam

I have gone through your RIA Consultation Paper and found The objective of the consultation paper is to specify uniform standards across all the intermediaries/persons engaged in providing investment advisory services irrespective of whether such activity is incidental to their primary activity or not and to address the gaps or overlaps in legal or regulatory standards. it is the best move to regulate the intermediaries. As an advisor I have noticed, even though every aspect is kept in mind to achieve the objective, something is left which may hurts the objectuive. I want to highlight and hope that it will be implemented in the final draft of the paper

By referring point No. 4.1.3  “In terms of IA Regulations, investment advisers are not allowed to sell any product and/or to provide execution services. Only corporate entities registered as investment adviser can offer execution or distribution services, subject to the condition that the investment advisory services are offered through separate identifiable division or department.”

I found 2 Problems

Problem-1: I found that investors might be hit by double charges 1 RIA Fees and 2 Commission Charges paid to Distribution Channel of Corporate RIA.

Problem-2: I found that Objective of the consultation paper to regulate uniform standards across all the intermediaries is moved out of focussed and seems biased decision.

Solution: It should be banned for RIA’s Distribution Channel to distribute regular plans in which commission is paid to the distribution channel to avoid double charges as well as this will also achieve Objective of the paper to regulate uniform standards across all the intermediaries.

By referring point No. 4.1.4 – c “The person who seeks to continue to engage in the distribution of mutual fund products shall use the nomenclature as ‘Mutual Fund Distributor’. Such person shall not be allowed to provide basic or incidental advice in respect of mutual fund products except describing the product specification without recommending any particular product.”
Problem: I found that there is a pitfall for Investors that MF Distributor will give him choices of their own benefits and will act like gift shop’s sales person. One more thing is that when there are no responsibility chances of miss selling will be increased like (Goods Once Sold will not be Taken Back or Exchanged).

Solution: MFDs should be allowed for incidental advisory it might be limited to guide proper fund selection to avoid miss selling.

I would like to suggest 2 More points for the objective of the paper.

1 AMC also should have different subsidiary for distribution just like banks and should also sell other AMC’s schemes for making unbiased selling.

2 AMC RMs should also be controlled in the same manner how the RIAs are controlled.

All above changes in the Paper will make paper more objective centric

Thanking You

Advisor Name

ARN-xxxxxx

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