SEBI to frame guidelines on distributor regulation soon

With the introduction of guidelines, thousands of distributors selling financial products will come under the regulatory control

June 27, 2012 4:36 IST | India Infoline News Service
Market regulator SEBI (Securities and Exchange Board of India) has recently received a go-ahead from the Financial Stability & Development Council (FSDC) to formulate guidelines on distributor regulation. However, no information is provided on the date of implementation. FSDC is the apex-level body constituted by government of India.

With the introduction of guidelines, thousands of distributors selling financial products, such as insurance, mutual fund schemes, fixed deposits and pension plans, will come under the regulatory control.

FSDC’s go-ahead is important because distributors sell products that are regulated by different financial regulators. FSDC has representation from all the major financial regulators, the Reserve Bank of India (RBI), the Insurance Regulatory and Development Authority (IRDA), SEBI and the Pension Fund Regulatory and Development Authority (PFRDA).

In September 2011, SEBI had introduced the concept paper on regulation of investment advisers, and has received feedback from stakeholders, experts and people. Based on the feedback, the SEBI board is proposing a regulatory approach for investment advisors.

According to SEBI, the regulations shall be implemented through a self-regulating organisation (SRO). For setting up an SRO, if some capital support is required, the regulator would be willing to provide that capital support as well.

Pankaaj Maalde, head-financial planning, ApnaPaisa.com, said, “The concept paper mentioned that if anyone who wants to become an investment advisor, should acquire professional qualification like CA, MBA or have at least 10 years of experience in the finance industry.”

Mr Maalde, further elaborated, “I think a CA and an MBA are not competent enough to advice on personal finance. The certified financial planner (CFP) certification should be given preference while deciding the same as they have gone through the each module of the personal finance planning. Let us wait for the final version of the regulation. Hope it will serve the purpose and benefit the society at large.”

In a recent development, mutual fund industry body AMFI (Association of Mutual Funds in India) is closely looking at taking up the role of an SRO. As an SRO, AMFI could take up the responsibility of regulating distributors.

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