The Securities and Exchange Board of India (SEBI) has decided to set up a working committee to review and strengthen the regulatory framework governing Mutual Fund Distributors (MFDs) and Investment Advisers (IAs). This strategic step aims to ensure that distributors and advisers operate under clear, robust standards that protect investors, improve professional conduct, and promote accountability in India’s growing financial markets.
The move comes as part of a broader SEBI initiative to refine intermediary regulations and enhance investor protection in India’s asset management and advisory ecosystem. The decision reflects market feedback and regulatory priorities amid rising investor participation in mutual funds and financial advice services.
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Why the Working Committee Is Being Formed
SEBI’s plan to constitute a working committee is aimed at addressing several long-standing issues in the regulatory framework for MFDs and IAs. These intermediaries play a key role in directing retail savings into capital markets and advising investors on financial products, but regulators have acknowledged gaps in areas such as professional standards, incentives, disclosures, conflict of interest management, and compliance mechanisms.
Mutual Fund Distributors (MFDs) help investors buy, sell, and manage mutual fund investments, while Investment Advisers (IAs) provide personalised financial advice. Both functions are critical to investor decision-making, and SEBI has been progressively tightening oversight by mandating certifications, conduct norms, and clear reporting channels.
Among recent regulatory developments impacting these groups, SEBI has already revised incentive structures for distributors, dropped inconsistent clauses that were prone to misuse, and indicated stronger scrutiny of social media representation by certified intermediaries. These changes have set the stage for a broader review by a dedicated committee.
What the Committee May Focus On
While SEBI has not yet publicly detailed the full terms of reference for the working committee, industry experts say it is likely to examine several core areas:
- Professional Standards and Certification: Strengthening qualification and certification requirements so that MFDs and IAs meet minimum competency benchmarks, possibly including additional examinations or continuing education.
- Conflict of Interest and Transparency: Enhancing rules to ensure distributors and advisers disclose potential conflicts and maintain clear separation between advisory and commission-based roles.
- Investor Protection Measures: Improving disclosure requirements, suitability standards and conduct norms so that investor interests are placed at the forefront of advice and distribution.
- Compliance Framework: Revisiting ongoing compliance obligations to align them with recent regulatory changes, such as the removal of outdated incentive frameworks and the introduction of modern compliance tools across intermediaries.
By consolidating these elements, the committee aims to evolve a consistent, cohesive regulatory model that strengthens the fiduciary responsibility of advisers and protects investors in a market environment where digital channels and online distribution are rapidly expanding.
Broader Regulatory Push by SEBI
The decision to form this working committee fits into a larger regulatory push by SEBI to modernise and future-proof India’s financial markets. In recent years, SEBI has been active on multiple fronts — from updating mutual fund regulations and distribution incentives to strengthening conduct standards and developing technology-based supervision frameworks.
For instance, SEBI recently introduced enhanced reporting and risk-management requirements for mutual funds and other asset classes under the updated SEBI (Mutual Funds) Regulations, 2026, which take effect from April 1, 2026. These new rules tighten governance, disclosure, valuation norms, and trustee oversight across the mutual fund industry.
SEBI has also taken steps to revise distributor incentive structures — particularly to encourage onboarding of new investors from Tier-2 and Tier-3 markets and women investors — while ensuring such incentive schemes are less prone to misuse.
By taking a structured approach through working committees and consultation with market participants, SEBI intends to build a regulatory architecture that balances investor protection with ease of doing business for intermediaries. This is part of a longer-term vision for more transparent, efficient, and trustworthy capital markets in India.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
