IFSCA issued guidelines on distribution of mutual funds and insurance products by Finance Company or Finance Unit

May 05, 2021 | by Avantis RegTech Legal Research Team

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Finance & Taxation Compliance

The International Financial Services Centre Authority (IFSCA), on May 03, 2021 issued guidelines on distribution of mutual funds and insurance products by Finance Company (FC) or Finance Unit (FU) which applies to all finance company or finance unit registered with the Authority under section 3 of IFSCA (Finance Company) Regulations, 2021 and who intends to undertake the activities.

Further, the general guidelines to be adhered for undertaking the activities are as follows:

• The activities are to be carried out on fee basis, without any risk participation.

• All employees to possess the requisite qualification as per industry best practices.

• Ensuring standardized system of assessing the need of products for a customer and the process of initiation.

• Segregating functions of the marketing and operational staff.

• There shall be a Board approved policy encompassing the model of distribution such investment products to be adopted, issues of customer appropriateness, suitability, customer compensation, grievance redressal arrangements and marketing and distribution of products.

• The FC or FU shall not follow any restrictive practices or link the sale of its investment products to any other products offered by it.

• There shall be a Code of Conduct for the sales personnel who shall adhere to the same.

• The FC or FU is only acting as an agent shall be clearly brought to the notice of the customer.

• No incentive shall be linked directly or indirectly to the sale or income received from marketing or distribution services of such investment products.

• The FC or FU shall disclose in the ‘Notes to Accounts’ to their Balance Sheet, the details of fees/remuneration received in respect of marketing and distribution function undertaken by them.

Furthermore, it even provides the following guidelines:

• Guidelines on distribution of mutual funds units

• Guidelines on distribution of insurance products

[Circular no. F. No 172/ IFSCA/Finance Company/Unit Regulations/2021-22/4]

 


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