SEBI Forms Working Group to Examine Overlap Between Mutual Fund Distributors and Registered Investment Advisors

Securities and Exchange Board of India (Sebi) Streamlines Mutual Fund Regulations

Sebi has established a working group to review the regulatory framework for mutual fund distributors (MFDs) and registered investment advisers (RIAs), with the goal of harmonizing overlap between the two roles. The move aims to clarify regulatory boundaries and ensure consistency across the advisory framework.

Key Developments

• A working group has been set up to review the extant regulatory framework of MF distributors and harmonize overlap, if any, between MFDs and RIAs.
• Sebi is preparing a common advertising code and a penalty structure for investment advisers to strengthen the ecosystem.
• The regulator is developing a digital platform, Sebi SETU, to provide end-to-end regulatory guidance for investment advisers.

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Regulatory Ecosystem

• India has approximately 1,000 registered investment advisers, with around 470 being individuals and the rest institutional entities.
• The number of RIAs has declined since 2021, a trend the regulator views as a concern.
• Sebi is working to make the investment advisory ecosystem more "trusted and accessible" as India's investor base expands rapidly.

Concerns and Penalties

• The regulator is concerned that the gap in regulated advisers is being filled by unregulated voices on social media, including financial influencers (finfluencers).
• Sebi has taken action against finfluencers, including ordering Avadhut Sathe to disgorge over ₹500 crore for providing unregistered investment advice.
• The regulator's investor survey shows that nearly 62% of prospective investors are influenced by finfluencers, which can distort investor behavior and weaken market discipline.

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