decision in 2009 to ban entry load on mutual funds thereby bringing in an advisory fee regime where the investor would decide on the fee to be paid to the distributor based on the service offered.
Later the capital markets regulator thought of clearly defining the roles of distributor and advisor.
In the meantime, the Insurance Regulatory and Development Authority (Irda) also took steps to rationalise the commission structure in the first year of the product sale in a bid to curb mis-selling and bring in better practices in the market.
In 2013, Sebi brought in the Investment Advisor Regulations where it laid down guidelines on who qualifies as an advisor and also drew broad contours of the rules and regulations within which they need to operate.
Sebi also invited applications for setting up Self Regulatory Organisation (SRO) for mutual fund distributors. While three organisations — Association of Mutual Funds of India, Financial Planning Standards Board, India (FPSB) and Financial Intermediaries Association of India (FIAI) have applied for forming an SRO, Sebi is yet to take a decision on appointing one of them.
Once an SRO is in place, it will bring in minimum professional standards for MF distributors, lay down rules and regulations for them along with enforcing them and also having a dispute resolution forum for investors. This will go a long way in regulating the distribution space in the mutual fund industry.
“The decision to ban entry load through was disruptive was a good decision in the long run. Sebi’s decision to define mis-selling as a fraudulent practice was also a major decision in this area as it becomes more serious and the move will curb such practices,” said V Ramesh, deputy CEO, AMFI.
The way forward
While the regulator has brought in investment advisor regulations, very few financial planners have moved forward to get themselves register as investment advisors and are rather willing to work as distributors.
Experts say that the regulator needs to bring in more clarity so that people can look forward to become an advisor.
“There is lack of clarity in the regulations and there is a lot of confusion which