22 July 2024 Punjab Khabarnama : At a time when retail inflows into mutual funds through SIPs are hitting new highs on a monthly basis, Sebi chairperson Madhabi Puri Buch has cautioned distributors against mis-selling or false advertising.
The first female chief of the Securities and Exchange Board of India (Sebi) said that she strongly believes that the interests of the customers should always come first.
“Does your heart beat for the customer? Think about the person you are selling to like he is your father-in-law. If that fund goes up in the wrong way, and he knowingly took some risk, that’s different. But if you mis-sold something to him, would you be able to look him in the eye and explain what happened? My view on this has not changed in 24 years,” she said while speaking at an event organised by SBI Mutual Fund.
Buch further said that mutual fund distributors are regulated even though it is a common misunderstanding that there is no regulation in that area.
She said that a mutual fund distributor is an agent of the fund houses, similar to an employee, so if there is mis-selling or false advertising then the AMC is liable.
“If the agent does something that the mutual fund is not permitted to do, the mutual fund is responsible and liable, and we will enforce our regulations against them,” she said.
She further explained that any advertisement that an AMC cannot issue, a distributor also cannot issue.
“Distributors, as agents of mutual funds, must restrict their advice to the mutual fund area because they are registered with AMFI. They cannot give advice on F&O trading and claim it is allowed because they are registered as a distributor. If they do so, it is illegal,” she said.
The Sebi chief also said that the regulator is in the process of releasing a consultation paper to tackle the issue of finfluencers and registering at RAs.
“Our team is on the job,” she said. “You should see a consultation paper reasonably quickly, which will address the regulatory arbitrage status there,” she added.