SEBI raises questions on MF distributors' qualification

Mutual fund distributors are in for fight for their livelihoods. A SEBI concept paper on the regulation of investment advisors suggests that distributors be qualified personnel and this puts pressure on traditional distributors who are mostly unqualified, reports CNBC-TV18 Mitra Joshi and Payaswani Upadhyay.

Mutual fund distributors, who are already struggling with the ban on entry loads, now have another issue to worry about. SEBI has raised questions over whose interests these distributors serve, since they charge a commission from the fund houses, and also charge customers an advisory fee.
Given this duality, SEBI has a suggestion to split distributors into two categories: advisors, and agents. Under this split, advisors will charge customers an advisory fee, while agents will charge the fund house a commission and there is no scope for an overlap between the two.
Not surprisingly, distributors are not happy with this suggestion.
Gajendra Kothari, Independent Financial Advisor, Etica Wealth Management says, "Overnight you are asking them to change the model and take complete U-turn, it is going to be very difficult for them. If you take existing revenue, there will be hardly any people left in this industry."
SEBI also wants these advisors and agents to have a basic educational requirement, along the lines of a CA or an MBA. Alternatively, the advisor or agent needs to have at least ten years of relevant work experience. Many experts feel this move is warranted.
Rashesh Shah, Chairman and CEO, Edelweiss Fin Services says,