The S&FA Regulations provide licensing and operational requirements for securities advisers, futures advisers and distributors of units of collective investment schemes (CIS), and voluntary pension funds (VPF) managers. The amendments introduce a dedicated framework for securities advisors wanting to only undertake distribution of CIS/VPF units, without offering any advisory services, in addition to creating exemptions for microfinance banks, electronic money institutions and non-bank microfinance companies engaging in distribution of CIS/VPF units. To encourage existing players, the draft amendments clarify that securities advisors may inherently carry out distribution function without any separate fees. For encouraging participation of qualified individuals and tech startups, qualification requirements are being rationalized and eligibility criteria for individuals in full-time employment is specified while ensuring that any conflict of interest is adequately managed.
To improve investor protection and to discourage mis-selling, amendments also categorically restrict distributors from using certain nomenclature. The fit and proper criteria is also being rationalized and the role of industry associations is introduced in line with international best practices. The draft amendments aim to cater to the evolving needs of the sector in this backdrop, while keeping in mind the long-prevailing objective of increasing and broadening the investor base in country’s capital market. The changes are intended to enable growth in mutual fund distribution channels, encourage third party distribution of CIS and VPF units, promote a facilitative digital distribution regime and simplify overall licensing procedures and requirements. Globally, advisers and distributors have played a pivotal role in expanding market outreach to untapped investor segments, harnessing retail investors and more effectively channelizing savings into investments through technology enabled solutions/platforms. The amendments, drafted after an initial round of industry consultations, will be further improved by incorporating feedback and suggestions received during the public consultation period.