In FY 2023, the Mutual Fund Distribution landscape witnessed significant growth as close to 1800 MFDs achieved top distributor status, marking an increase of 237 new qualifiers compared to the previous year. These top distributors collectively managed an impressive AUM (Assets Under Management) of Rs. 14.75 lakh crore and received gross commissions totaling Rs. 10,500 crore. Notably, they account for a substantial 65% of the total AUM across different plans. This surge in top distributors reflects the industry's robust expansion, with criteria established by SEBI to identify them, including factors such as their presence in multiple locations, AUM management, and commission earnings from fund houses. Over the last five years, the count of top distributors has grown by 65%, accompanied by a 50% increase in AUM, reaching Rs. 15 lakh crore in FY 2023, and a 32% rise in gross commission earnings, totaling Rs. 10,532 crore.
SEBI Chief Madhabi Puri Buch has emphasized that Registered Investment Advisors (RIAs) are only permitted to charge investment advisory fees and cannot provide portfolio management services (PMS) with performance-linked fees. Speaking at an event organized by the Association of Registered Investment Advisers (ARIA), Buch clarified that RIAs can offer financial advice to clients, but any fees or charges should strictly align with this advisory role. She noted that while SEBI is addressing issues related to stock tipping and malpractices, operating illegal PMS schemes is a clear violation of investment advisory regulations. Buch also highlighted that RIAs should not receive fees other than investment advisory fees, including referral fees for unregulated products such as the EB-5 Investor Visa or fractional real estate. Additionally, Buch discussed potential changes in education qualification requirements for para planners and the examination process for existing RIAs, emphasizing the importance of corporate compliance and registration with the relevant authorities for RIAs.
SEBI, the regulatory authority in India, has directed Asset Management Companies (AMCs) to convey a crucial message to Mutual Fund Distributor (MFD) associations: they must eliminate the term 'IFA' (Independent Financial Advisor) from their association names. This directive underscores SEBI's commitment to regulating the financial advisory sector and ensuring transparency and ethical conduct within the industry. During the recent ARIA event in Mumbai, SEBI Chairperson Madhabi Puri Buch also addressed issues of malpractice within the sector while acknowledging the valuable contributions of Registered Investment Advisors (RIAs) in promoting investor welfare.
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