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Regulation & Development-Two Sides of the Same Coin( Capital Markets)

Date : 31-03-2016
Name: Srinivasan T Seshacharya-CFP ARN NO :87541
Firm Name : WealMan Associates City : Bengaluru

What is the Problem?
Regulation without Development?
Unilateral Decisions?
Intent (of Regulator) not matching the Content.
Who are the Primary Stakeholders?
1) Consumers
2) Financial Intermediaries
3) Asset Management Companies
What are the issues, currently, not enabling the Environment ?
1 ) SEBI Circular SEBI/HO/IMD/DF2/CIR/P/2016/42 March 18, 2016
What is this about?
1) Disclosures of Commission paid AMCs/Mutual Funds (MFs) to distributors (in absolute terms) 
2) Disclosure of Executive Remuneration

What is the intent, supposed to be from the Regulator?
1) Transparency of information
2) Alignment of remunerations with Investors Interest.

Among the Financial Intermediaries, who are the ones, providing the Last Mile Connectivity?
The Independent Financial Advisor or AMFI (Association of Mutual Fund Certified Advisors/Distributors)

Background:
In Financial Intermediary Space there are:
1) Institutions (Banks Etc.,)
2) Small and Medium Scale Firms
3) Individuals

What is it, the Individuals-IFAs /AMFI Distributors, want to draw your Kind Attention?
1) Who are helping in terms of numbers and retail participation in the Capital Markets? 
2) Who are having the last mile connectivity?
3) Who are hand holding the Consumers?
4) Who has the trust of Consumers?
5) Who are already facing many obstacles, but still persisting with Mutual Fund Penetration?
6) Who are already making enough disclosures to the Consumers?
etc.,

The answer to all the above is : IFA`s/Individual AMFI Distributors.

Therefore, why is this SEBI Circular not relevant to the CONSUMER, who is supposed to benefit from the Intent?
1) Commission Disclosure, will not in anyways affect or deter the consumer, to take an informed decision.
2) We have already moved away, from a commission embedded pay structure, in Mutual Funds
3) Why complicate it further?
4) The IFA`s/ Individual AMFI Distributors, have anyways, been servicing the Consumers. 
5) Any intelligent Consumer knows, that services/distribution, comes at a cost and will any way factor that, into the decision making.
6) The Distributors Commissions, is not at the cost of Consumer growth or Wealth Creation.
7) All this disclosures, will anyway be at a cost from Registrars and adding to the expense ratio.
8) It will be more of distraction and an overhead on the time and efforts of IFA`s/Distributors, to further explain the background as the case may be.

What is the Expected Solution?
With the above rationale, the Decision Makers should:
1) RECALL this Circular and any other Circular in the past, which is not serving its intended purpose.
2) Make REGULATION and DEVELOPMENT mutually independent, but aligned to ALL STAKEHOLDERS.
3) Don?t Penalise Individuals for the Follies of the Institutions.
4) Ensure LEVEL Playing.
5) Acknowledge and recognise the importance of Individual IFA`s/Distributors and their efforts to Wealth Creation
6) Aid and encourage the very important, less understood but taken for granted IFA`s /AMFI Distributors.
7) Seek/Solicit/on- the -ground ?and- near- the- Consumer IFA`s /AMFI Distributors, in the Decision Making.


Yours truly,

Srinivasan T Seshacharya

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Comments Posted
Rama kanta dhar ARN NO :3399 rourkela, 05 Apr 2016

To Sebi The same dailouge of three idiots KAHANA KYA CHAHATE HO?

Rajaraog ARN NO :Kautilya Jalundhar, 01 Apr 2016

Here is tough dilemma for the regulator : A transparent distributor vs a transparent product. Though it a much difficult call , the regulator chose it in favor of a transparent product. The simple reason is that ,for example if an AMC states that the overal TER is 2 % and distributor commission is 1%. Its binding on them to pay that 1% to the distributor. Currently , unfortunately its an average , and not the actual. There are distributors who get paid 2% commission and there ones who get paid 0.2%. In this chaos created and being nurtured by AMCs , the poor and the hard working (mostly the individual IFAs) are feeding the rich and wealthy( the NDs and the Banks). So even if we keep the investor outside of this discussion for a while , the disclosure as asked by the new regulation , makes a ton of impact. Only the honest and hard working will survive. Those who do not add value will perish.Those IFAs who stick to adequate disclosures will have enough opportunities to survive.

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