Posts Tagged ‘financial products’

IFAs tying up with Brokerage Houses to turn Sub-Broker :)

IFAs - Sub-Broker

IFAs tying up with Brokerage Houses to turn Sub-Broker


Independent financial advisors (IFAs) are tying up with large distributors and brokerage houses to act as sub-brokers, to keep themselves afloat after the entry load ban on mutual funds.

Earlier, IFAs used to make most of their earnings by selling fund schemes.


A sub-broker is a person who acts on behalf of a stock-broker as an agent, or otherwise for assisting the investors in buying, selling or dealing in financial products through stock-brokers.

Many independent financial advisors have approached the company asking it to create a platform through which they can offer advisory services to their clients.

There is a plan by companies also to launch such a platform in coming weeks.

Broking industry representatives said that IFAs have been left with no option but to tie up with large brokerage houses after they have been denied of their basic source of income (2.25 per cent entry fee on mutual fund investment).

Brokerage Houses are set to provide them with basic infrastructure and resources to provide investors advisory services.


IFAs are now required to charge a fee for providing their advisory services, instead of a commission on each transaction that they received earlier.


The Securities and Exchange Board of India (Sebi) had asked mutual fund distributors not to charge any entry load with effect from August 1. It had instead asked them to charge as per the service provided.

It means that a distributor cannot charge any fee for merely selling a product but can charge only if they offer advisory services to investors.

The new norm has queered the pitch for thousands of independent financial advisors, who used to make their earnings by merely selling mutual fund products.

Jagannadham Thunuguntla, equity head of Delhi-based brokerage house SMC Capital, said that the entry load ban has come as blessing in disguise for large brokerage and distribution houses.

β€œMost of the mutual fund business would now be routed through big distribution houses as IFAs struggle to provide the necessary advisory service on their own.

The sub-broker model is one of the few viable options available with the small financial advisors,” he added.

When asked if IFAs approached SMC showing their interest in becoming sub-brokers, Thunuguntla said that though inquiries were not so aggressive, they expect more IFAs to come seeking their help as the time passes.


ULIPs to be Commission Free after April 1, 2011 :)

ULIPs to be Commission Free after April 1, 2011

ULIPs to be Commission Free after April 1, 2011

Those investing in Unit Linked Insurance Plans (ULIPs) are set to be secured of this burden of paying commission after April 2011 even though consumers buying pure-life insurance products will have to go on paying commission to sellers of these policies.


However this is said :

– to help improve returns to investors in ULIPs,

-curb mis-selling and

– help raise insurance penetration by having a modest commission on pure insurance products in turn creating incentives for sellers.


Further, it will also pave the way for a load-free regime on most financial products after April 1, 2011.

Moreover, the suggestion to cut commissions from the policy-holders” premium is against the insurance regulator IRDA‘s demand to keep the existing structure intact
while agents are entitled to get a commission of upto :

– 40% of the premium in the first year,

– 7.5% in the second year and

– 5% in the third year and thereafter.


Further, if the panel”s proposal passes muster with the HLCC, upfront commissions embedded in the ULIP premium will be cut to 15% by April and 7% by October next year.

While, ULIPs will be load-free by April 1, 2011 just like mutual
funds and pension products under the new pension scheme
and insurance companies will help their agent”s transit to a
fee-based model instead of a commission based model.


Additionally, sellers of term insurance products with pure lifecover sans investment will have to reconcile to lower commissions which will be cut to 5% of the premium after April1, 2011 and will continue till penetration reaches the targets set by the government.


Interest Rate Futures Trading Re-Launched in India after 6 years :)


Trading in interest rate futures (IRF) kicked off in India after about six years on the National Stock Exchange (NSE)’s platform on Monday.


The exchange traded financial instrument will give banks and corporates an avenue to hedge their interest rate risks.


IRFs are contracts traded on the bourses with an agreement to buy or sell an underlying instrument with the date and the price pre-specified.


The launch of IRF came a year after trading started in currency futures, which gives participants an avenue to hedge against currency risks.

With the launch of IRF, market participants now have the option to hedge foreign currency risks as well as interest rate risk.


The launch of interest rate derivatives means a lot to the NSE, its constituency of brokers and all economic entities who face interest rate risk,experts quoted on the recent development.


SBI, Union Bank of India, Central Bank of India, Axis Bank, ICICI Bank, and Standard Chartered Bank actively traded in the IRF market.

It’s the second birth for IRF as the product was launched in 2003 but did not succeed.


All resident Indians and financial institutions, including

banks and FIIs, can trade in IRF in its new format. πŸ™‚

Allot IDRs on proportionate basis: SEBI

Allot IDRs on proportionate basis: SEBI

Market regulator SEBI today said that the allotment of Indian Depository Receipts, a tool used by foreign companies to raise funds from Indian bourses, should be made on proportionate basis and not at the discretion of the issuer.


“Allotment to all these categories shall be made on proportionate basis only,” SEBI said, amending its guidelines concerning general and disclosure requirements pertaining to IDR issues.

The market regulator further said that in case of underwritten issues, if the issuing company does not receive the minimum subscription of 90 per cent of the net offer, from the date of closure of the issue, the issuing company shall forthwith refund the entire subscription amount received.


Underwriting refers to the process that a large financial service provider like a bank or investment house undertakes to assess the eligibility of a customer to receive their financial products and in case the product is not bought, the financial service provider takes them.

Commenting on it, SMC Capitals Equity Head Jagannadham Thunuguntla said, “It is a right step for creating a good IDR market in India. It will help in smooth execution of IDRs.”


SEBI further said that the audited financial statements should be prepared in accordance with Indian GAAP, or with the International Financial Reporting Standards (IFRS) or US GAAP, for a period of three financial years immediately preceding the date of prospectus.

The report prepared by the statutory auditors of the issuing company should disclose financial statements in Indian rupees, while the issuing company would do it in Sterling Pound, Euro, Yen or US Dollar. πŸ™‚