The Association of Mutual Funds in India has issued a circular on nomenclature to be used by mutual funds distributors (MFD). According to the circular, MFDs can longer call themselves as advisors.

As per Regulation 3(3) of the SEBI (Investment Advisers) Regulations, 2013 notified on July 3, 2020 –

‘No person, while dealing in distribution of securities, shall use the nomenclature “Independent Financial Adviser or IFA or Wealth Adviser or any other similar name” unless registered with SEBI as an Investment Adviser.’

Pursuant to the circular, MFDs who have terms such as Adviser / Advisor / Financial Adviser/ Investment Adviser/ Wealth Adviser/Wealth Manager/Wealth Managers etc. in their registered names need to get it changed.

AMFI has issued a list of 52 permissible/non-permissible names for the broad guidance of MFDs. It may be noted that the list is illustrative and not exhaustive. MFDs need to ensure that their name is in line with the list. An MFD can contact AMFI if their proposed name is not included in the list of permissible / non permissible names.

The list of permissible / non permissible names can be found here

SEBI has clarified that the name of MFD should reflect the registration held by the entity and should not in any way create an impression of performing a role for which the entity is not registered. Thus, every MFD, while dealing in distribution of securities, should clearly specify that he /she is acting as a MFD and not an advisor. Only SEBI-registered advisors are permitted to use terms such as advisor, financial advisor, investment advisor, and other similar names.

MFD also need to mandatorily mention the tagline ‘AMFI-registered Mutual Fund Distributor’ along with / below their name in all forms of communication. The name and tagline should be in a clear and legible font size. This guideline needs to be followed in all forms of communication i.e. website, mobile app, printed or electronic materials, business card, sign board etc.

The timeline for application to Registrar of Companies (RoC) for change in name of MFDs (including MFDs established as proprietary/partnership firms) has been extended from October 15, 2020 to October 31, 2020.

The move can help retail investors to clearly differentiate between a mutual fund distributors and investment/mutual fund advisors and accordingly decide which service they want to opt for.

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