InvestorQ : What is the confusion about the distinction between advisors not being allowed to give distribution services to clients?
Crowny Pinto made post

What is the confusion about the distinction between advisors not being allowed to give distribution services to clients?

Answer
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8 months ago


I think you are talking about the recent SEBI consultation paper about not allowing independent financial advisors (IFA) to also distribute mutual fund and other products. The idea was to not mix the advisory and selling services as it would lead to conflict of interest. In the past, the SEBI had disallowed individuals and partnership firms involved in advisory services to distribute products. However, corporate entities were allowed to do the same provided the company maintained Chinese walls between the two businesses and housed them in separate entities.

Now the regulator wants individuals and partnerships to also be permitted to offer distribution services too. This has caused fear among some of the genuine individual advisors as they feel that the advisory nature of the business get diluted if most of the advisors get involved in distributing products as it creates a clear conflict of interest. It remains to be seen how this regulation eventually evolves.