Sebi moves to review MF distributor framework

Synopsis

Sebi has formed a working group to review mutual fund distributor regulations and address overlaps with investment advisers. The regulator is also developing a common advertisement code and a digital platform, Sebi Setu, for investment advisers. A standardized penalty structure and simplified NISM module are also planned, amidst concerns over a decline in registered investment advisers.

Mumbai: The Securities and Exchange Board of India (Sebi) has set up a working group to review the regulatory framework of mutual fund distributors and address overlaps between them and investment advisers, chairman Tuhin Kanta Pandey said Monday.

The regulator is also working on a common advertisement code for all intermediaries to reduce operational challenges and improve consistency.

A digital platform - Sebi Setu - is being developed, to provide simple and end-to-end regulatory guidance from registration to ongoing compliance for investment advisers, Pandey said.

The other measures for promoting compliance and transparency include a standardised light-touch penalty structure for investment advisers and a simplified National Institute of Securities Markets (NISM) module for persons associated with investment advice, who are engaged in sales and other non-core functions, the Sebi chief said at an event.

Pandey also raised concerns about the declining number of registered investment advisers in the country. "It is a matter of concern that the number of registered investment advisers has declined since 2021.

As investor base expands rapidly, our market needs more regulated advisers. Otherwise, the gap will be filled by unregulated voices — like finfluencers — who present opinion as expertise and speculation as strategy,” he said.

The regulator’s Investor Survey shows that about 62% of prospective investors are influenced by finfluencers. “This is undesirable. It distorts investor behavior, weakens discipline, and erodes trust,” Pandey said. India has around 1,000 registered investment advisers — 470 individuals and 530 non-individuals, according to Sebi data.

The regulator would continue outreach to encourage more qualified professionals to enter the registered advisory space, Pandey said. The Sebi chairman also pointed out the cultural issue of investors gravitating towards ‘free’ recommendations as the habit of paying for professional financial advice is still evolving in India. “The challenge is clear, make the registered advisory model viable, scalable, and attractive for qualified professionals,” he said.

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