Need lead regulator to watch over financial advisors: PFRDA

In the wake of multiple scams involving wealth managers, PFRDA chairman Yogesh Agarwal today said there is a need to have a lead regulator who would watch over financial advisors.

"Ideally there is a need for a lead regulator who will co-ordinate and set off dos in consultation with rest of the financial regulations. The key to the success to this lies in the consensual approach with all regulators being on board and the lead regulator ensuring that individual investor concerns are taken care of," he said at an event here.

"The regulatory framework should involve the regulation of investment financial services by a wide range of entities including independent financial advisors, banks, distributors, fund managers. The investment in various financial products including but not limited to securities, insurance products, pension products, venture capital, private equity investment, mutual funds, while the activity of doing financial advisory can be treated under the proposed framework to a self regulatory norm," he said.

It should be noted that a couple of foreign banks' wealth management verticals were mired with multiple allegations, including that of selling products to high net people which were fictitious. Following the scams, there was an outrage over the need to regulate the space better.

Products sold by wealth managers typically include those coming under the ambit of different regulators like the pension fund regulatory and development authority (PFRDA), insurance regulatory and development authority (IRDA),
Securities and Exchange Board of India (Sebi) and Reserve Bank of India (RBI).

"There are various types of products involving various regulators and it is a basic issue because we all fight for our turf. Which is my area?", Reserve Bank of India Deputy Governor K C Chakrabarty said.

Agarwal added that problems pertaining to mis-selling, violation of code of conduct and conflict of interest in a product could be regulated by the concerned regulators but if it is inter-regulatory issue, the lead regulator can
intervene.

He said the variable commission in different financial products often led overselling of one product compared to the others.

Chakrabarty said the protection of customers should be paramount in regulation.

"Why are the regulators not able to do that (protect the
customers)? You see it is not an easy job."