Mutual fund distributors, independent financial advisers (IFAs), and wealth managers are awaiting clarity on the Securities and Exchange Board of India’s (SEBI) decision on Registered Investment Advisers (RIA).
In a board meet held on February 17, SEBI ruled that IFAs and wealth managers will not be allowed to use nomenclature like ‘independent financial advisers’ (IFAs) and ‘wealth managers’ without registering with SEBI as RIAs. “We are awaiting SEBI’s detailed circular on this. If it wants IFAs to not be distributors then what is the procedure? Will they have to leave distributorship and register as RIA? Clarity is awaited,” said Amol Joshi, a Mumbai-based mutual fund distributor.
The distributor and IFA community sought details of enhanced requirements relating to educational qualification, experience and net worth requirements for registered investment advisors.
The regulator approved changes to the law under which investment advisory firms, who advise clients on the buying and selling of various financial products such as stocks or mutual funds, will have to segregate their services from distribution.
Fees for such services will also be streamlined.
SEBI will also introduce enhanced eligibility criteria for registration as an investment advisor including for networth qualification and experience. There will be a provision for grandfathering existing individual advisers.
Pure-play distributors such as bank relationship managers etc whose job is to help execute such transactions will not be allowed to call themselves “financial advisors” or “wealth manager” unless they are registered with SEBI as investment advisors.
The new rules that were framed after the consideration of four consultation papers and public comments, are also aimed at bringing clarity in payment of fees and introduction of upper limit on fees charged to investors, SEBI said.
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