Revision in Fees for ARN Registration& Renewal for distributors

AMFI vide their  circular no. 35P/MEM-COR/3/10-11  dated May 19, 2010 has revised the ARN Registration and Renewal Fees wef 1st June 2010 for all category of distributors as mentioned in their appended circular.  As mentioned in yesterday's mail, the certification and examination  will be conducted by NISM wef 1st June 2010 as against AMFI.  The validity period of certification for non-individuals will be three years.

 

 

35P/MEM-COR/3/10-11                                                May 19, 2010
 
Dear All,
 
Re : Revision of fees – ARN Registration/ Renewal
 
The AMFI Board at its Meeting held on May 5, 2010 has decided to revise the fees for registration/ renewal of ARN with effect from June 1, 2010 as follows :-
 

Entity	ARN Registration Fees	ARN Renewal Fees
Banks/ NBFC/ Institutional Distributors	500,000	250,000
Public Ltd. Co.	500,000	250,000
Pvt. Ltd. Co.	50,000	25,000
Partnership Firm	25,000	12,500
Societies and Trusts/ HUF	25,000	12,500
Post Offices	15,000	7,500
Proprietorship Firms	10,000	5,000
Corporate Employees	5,000	2,500
Individual/Senior Citizens	5,000	2,500

 
It is further decided that the validity of ARN issued with effect from June 1, 2010 would be three years in case of non individual applicants. In case of individuals/ corporate employees, the validity period shall be computed from the date of receipt of application till the date of validity of AMFI/ NISM certificate.
  

 

 

3G auction ends, Govt to get Rs 67,719 cr windfall

ITS call For 3rd Generation

3G auction ends, Govt to get Rs 67,719 cr windfall
NDTV Correspondent & Agencies, 19 May, 2010

Auction for 3G licence ended on Wednesday, with bids for pan-India licence touching Rs 16,751 crore that ensures the government a revenue of Rs 67,719 crore.

No single bidder bid for a pan-India license and Delhi emerged the most valuable circle at Rs 3,317 crore, followed by Mumbai at Rs 3,247 crore. Among the major bidders, Idea paid nearly Rs 5,765 cr for 11 circles, Bharti paid Rs 12,290 cr for 13 circles, Vodafone paid Rs 11,617 crore for 9 circle while RCom paid Rs 8,583 crore for 13 circles.

The Winners:
Delhi: Vodafone, Bharti, Reliance Communications at Rs 3317 cr   
Mumbai: Reliance, Vodafone, Bharti Airtel at Rs 3247 cr   
Maharashtra: Tata Com, Idea, Vodafone at Rs 1258 cr  
Gujarat: Tata Com, Vodafone, Idea at Rs 1076 cr   
Andhra Pradesh: Bharti, Idea at Rs 1373 cr
Karnataka: Tata Telecommunication, Aircel, Bharti at Rs1580 cr
Tamil Nadu: Bharti, Vodafone, Aircel at Rs 1465 cr
Kolkata: Vodafone, Aircel, Reliance Communications at Rs 544 cr
Kerela: Idea cellular, Tata Telecommunications, Aircel at Rs 312.5 cr
Punjab: Idea Cellular, Reliance Communications, Tata Telecommunications, Aircel at Rs 322 cr
Haryana: Idea Cellular, Tata Telecommunications, Vodafone at Rs 222.6 cr
MP: Idea Cellular, Reliance Communications, Tata Telecommunications at Rs 258.4 cr   
Rajasthan: Reliance Communications, Bharti, Tata Telecommunications at Rs 321 cr   
U.P. (West): Bharti, Idea Cellular, Tata Telecommunications at Rs 514 cr   
U.P (East): Aircel, Idea Cellular, Vodafone at Rs 364.6 cr   

Today was the thirty-fourth day of the bidding. The government’s revenues from the 3G spectrum are much higher than its original estimates and even surpassed its revised estimates by a hefty amount. The 3G proceeds will help the government to bridge its fiscal deficit.The government had budgeted revenues of Rs 35,000 crore from sale of air waves for 3G and Broadband Wireless Access (BWA) put together.
The auction for Broadband Wireless Access (BWA) spectrum would begin soon after the 3G auction is over. The 3G auction had commenced on 9 April, 2010 and there were nine bidders in the fray for the slots of 3G spectrum on the block. The government auctioned three slots in 17 telecom service areas and four slots in the remaining five states of Punjab, Bihar, Orissa, Jammu and Kashmir and Himachal Pradesh.
BSNL and MTNL received spectrum outside the auction process, but the price would be determined by the auction price.
The third-generation spectrum allows subscribers to download hi-speed data and stream videos on mobile telephones. The successful bidders would be allotted air waves in September after the spectrum is vacated by the defence forces.
The 3G spectrum saw aggressive bidding by the telecom players as India remains one of the fastest growing mobile-services market by subscribers. With the addition of over 20 million new users in March, the mobile subscriber base in the country has jumped to 584.32 million customers. The number of telephone subscribers in India, both wireless and wireline combined, increased to 621.28 million at the end of March-2010 from 600.98 million in February 2010, thereby registering a growth rate of 3.38 per cent. With this, the overall Tele-density in India reached 52.74.
Telecom players hope that the 3G spectrum will ease capacity constraints and also increase the revenue per user, which has been falling due to intense completion in the sector.
For broadband wireless access, there are 11 operators are in the fray. The reserve price for BWA spectrum has been fixed at Rs 1,750 crore and only two slots of 20 MHz each are on the block.

 

Goldman Sachs Hands Clients Losses as Seven of Nine `Top' Trade Ideas Flop

(Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse. Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.
The struggles for analysts at Goldman Sachs, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.
“This says that Goldman’s guys are only human,” said Axel Merk, who oversees $500 million as president and chief investment officer of Merk Investments LLC in Palo Alto, California. “No one is always right. There are a lot of cross currents in this market.”
Gia Moron, a spokeswoman for Goldman Sachs, declined to comment.
China’s Bear Market
Goldman Sachs’s trading profits come from capturing bid- offer spreads when its traders act as intermediaries for clients, Gary Cohn, the firm’s president and chief operating officer, said last week in New York. Proprietary trading isn’t a main driver of earnings, he said.
The trade advice for customers is distributed by Goldman Sachs’s global markets economic research group. It tracks the performance of the trades in a daily research note. The time period of the recommendations is 12 months.
The performance this year is a reversal from 2009, when nine of Goldman Sachs’s 11 trading recommendations made money. Investors saw a 22 percent return owning Chinese stocks and a 12 percent gain buying the British pound versus the dollar, according to a Goldman Sachs note on Dec. 1.
Goldman Sachs analysts made eight trade recommendations for this year in December, including telling clients to buy the British pound against the New Zealand dollar. On April 1, Goldman Sachs added a ninth “top” trade, telling clients to buy Chinese stocks listed in Hong Kong and predicting the Hang Seng China Enterprises Index would rise 19 percent to 15,000.
Tough Analysis
Since then, the gauge has slid 9.4 percent to 11,426.18. The Shanghai Composite index has entered a bear market, losing about 21 percent this year. That’s the third biggest decline in the world after Greece and Cyprus. The decline accelerated this month on concern Greece, Spain and Portugal will struggle to finance their budget deficits and dismantle the euro.
The Chinese stock recommendation was made by a group led by Dominic Wilson, a senior Goldman Sachs economist in New York. Wilson cited inexpensive valuations and “robust” economic growth. He also said investors have already factored in the risk of higher interest rates in China.
Wilson wasn’t available to comment because he was out of the office traveling, according to an e-mail.
Exit Calls
“Emerging markets appear superior to the developed world, but the market isn’t trading that relationship,” said Eric Fine, who manages Van Eck Associates Corp.’s G-175 Strategies emerging-market hedge fund. “It may be that some assets are mispriced, but if the market starts to discount the end point of the game, such as the collapse of the euro, it’s not that mispriced.”
Analysts at Goldman Sachs recommended investors exit two trades in February, one involving interest-rate swap rates in the U.K. and another advising clients to buy credit-default swaps in Spain and sell similar contracts in Ireland. The first trade had a potential loss of 24 basis points and the other had a return of 2.9 percent, according to figures issued in the appendix of the research note in February.
Owning currencies that are tied to growth is the only remaining trade that has increased in value this year, according to Goldman Sachs. The Goldman Sachs FX Growth Index has climbed 3.4 percent since the firm made the recommendation in December.
Betting on Markets
Goldman Sachs makes more money from trading than any other Wall Street firm. In the first quarter, the bank’s $7.39 billion in revenue from trading fixed-income, currencies and commodities dwarfed the $5.52 billion made by its closest rival, Charlotte, North Carolina-based Bank of America Corp. In equities, Goldman Sachs’s $2.35 billion in revenue was about 50 percent higher than its nearest competitor.
Cohn told investors at a May 11 conference in New York that the firm lost money on only 11 days in the last 12 months. He said that uncanny streak of success refutes suspicions that the bank depends on proprietary bets with its own money.
“It is implausible that a proprietary-driven business model could be right 96 percent of the time,” Cohn said. Instead, he said the “simple answer” is that the firm makes money by capturing bid-offer spreads when acting as an intermediary for client trades.
Goldman Sachs executives have grappled before with questions about whether they’re better at making money for the firm than for their clients, according to an internal e-mail dated Sept. 26, 2007, that was released by a U.S. Senate subcommittee last month.
U.S. Lawsuit
The e-mail to Chief Executive Officer Lloyd Blankfein from Peter Kraus, who was then co-head of the company’s investment- management division, explains that individual investors, unlike institutional clients, occasionally make “comments like ur good at making money for urself but not us.”

The U.S. Securities and Exchange Commission filed a lawsuit against Goldman on April 16 accusing the company of misleading investors in a mortgage-linked asset. Goldman denies those allegations and said it will fight the charges.

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aF5tV7uvY0FU&pos=4

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News Round Up

It plans to invest in residential and commercial projects in smaller Indian cities as a passive investor.
US Fund Manager Blumberg Capital To Invest $100M In Indian Realty - Blumberg Capital Partners, a US-based realty fund manager, is planning to invest $100 million (about Rs 456 crore) in realty projects in India. It plans to invest in residential and commercial projects in smaller Indian cities, and will be a passive investor. The company did not have any time frame in mind, but is expecting to start investing within three years. The move is part of Blumberg Capital’s plan to diversify outside the US market. It is raising $1 billion from high net-worth individuals and institutions to start a real estate fund that will invest up to 30% in non-US assets, particularly in the Persian Gulf and India. (Mint)
JSW Steel likely To Sell Stake To JFE - Sajjan Jindal promoted JSW Steel has nearly finalised a share sale agreement with Japan’s second-largest steel maker, JFE, after about six months of discussion. JSW Steel is likely to have an extraordinary general meeting (EGM) early next month to take board’s approval. JFE is likely to buy a 14.9% stake in the Indian company for Rs 1,600 a share. At this price, JFE would pay Rs 4,500 crore, which would be a 39% premium to Tuesday’s closing price of Rs 1,150. (BS)
IDFC To Buy 26% Stake In Custodian Firm Orbis - Infrastructure Development Finance Co Ltd (IDFC) is acquiring 26% stake in Gurgaon-based custodian Orbis Capital Ltd for Rs 22 crore. The acquisition will be completed over the next two years. Orbis is claimed to be India’s first privately-held custodian registered with the capital market regulator Securities and Exchange Board of India. It started its operations in April 2009. (Mint)
Shriram Arm Orient Green Files DRHP For IPO - Orient Green Power Company Ltd (OGPL), an associate company of Shriram EPC Ltd (SEPC), has filed a draft red herring prospectus (DRHP) with SEBI for its proposed initial public offer (IPO). OGPL is engaged in power generation from renewable sources and has a portfolio of operating projects of 193.1 Mw. The company aims to expand its portfolio to 1,000 Mw in three years. The company is planning to raise around Rs 800 crore to support its Rs 4,000 crore investment plan. (BS)
Tilaknagar Nearing Liquors India Buy - Mid-sized spirits company Tilaknagar Industries Ltd (TIL), makers of Mansion House brandy brand, is reportedly in the final stages of discussion to acquire Hyderabad-based Liquors India Ltd, a distillery and bottling unit. VCCircle broke the story on May 12. The acquisition is likely to be completed over the next 2 to 3 months. In February, TIL struck a deal with Alcobrew Distilleries to acquire the latter’s six brands, which has reasonable presence in CSD (Army canteen) channels. (FC)
MSSL To Buy Partner’s Stake In JV - Motherson Sumi Systems Ltd (MSSL), an auto component maker, is buying 60% stake in Balda Motherson Solutions owned by its German JV partner Balda AG for an undisclosed sum. Motherson already owns 40% in plastic component producer, Balda Motherson Solutions, that was formed in 2006. The JV company had revenues of Rs 20 crore for the year ended March 2009. (ToI)

Zero trail commission for transferred MF accounts

Amfi says trail commission in case of transferred mutual fund accounts be put in an investor education fund. Last week, the Association of Mutual Funds in India (Amfi) banned charging of trail commissions from customers who have transferred their account to another distributor.  Click here to visit SME Buzz   Also Read   Related Stories News Now - IT helps markets to recover - NEWSALERT: Bombay Dyeing sells Mumbai property to Axis Bank for Rs 720 cr - Moody's sees 2nd wave of distressed debt exchanges - US economy is growing again: Obama - India's eco fundamentals strong: Ahluwalia More “After discussing various pros and cons, the board decided that the commission should not be paid to either distributor,” said H N Sinor, chief executive, Amfi. This is significant. In recent months, the war to gain customers has turned ugly in the wake of the ban on entry load from August 1, 2009. Industry sources said agents of some bigger distributors were poaching customers of smaller ones, getting them to sign a form for transferring their account. Amfi’s circular says that after the Securities and Exchange Board of India allowed customers to change distributors without a no-objection certificate from the current distributor, there has been a sharp rise in such requests. The reason: Trail commissions, which asset management companies (AMCs) pay to distributors if the customer stays with a mutual fund (MF) scheme. After the ban on entry load, distributors found themselves deprived of the money they made for wooing a customer to an MF scheme. The entry load was as much as 2.25 per cent or more for equity schemes. Said a leading distributor, “Yes, there has been poaching. But, everyone is gaining and losing customers at the same time.” The method is something like this. Approach a customer of a small broker and tell him he’s not being serviced properly. For instance, many customers were not aware of the ban on entry load and were carrying on with their systematic investment plans (SIPs). The existing distributor, consequently, was earning his 2.25 per cent load every month from the AMC. Such customers are told by rival agents that shifting will ensure a saving of 2.25 per cent a month. And, those not paying the entry load are offered better service. Then, the transfer letter signed by the customer is sent to the AMC. The AMC, in turn, issues a letter to the old distributor, saying the ‘broker code’ has been changed. In fact, industry sources said some fund houses that sought a reason for the change, were sent transfer letters with the customer’s signature with an additional reason filled by the sales people. However, many small players approached AMCs. They alleged that though they wooed customers, the trail commission was being paid to someone else. Faced with a serious problem, AMCs approached Amfi for a solution. The circular, issued on May 7, mandated that fund houses need not pay trail commission to either the old or the new distributor. Instead, the amount should be kept in a separate account and used for investor education. Said Rajeev Deep Bajaj, vice-chairman and managing director, Bajaj Capital, a leading MF distributor, “Though both old and new distributors will not be paid any trail commission, how does the investor gain? He has to pay anyway.” Fund houses, on their part, said the interest among distributors to bring new customers had come down substantially because of the entry load ban. And, poaching for trail commissions was only complicating matters, they said. All for a price Industry sources say to get access to customers of other distributors, data of fund houses have been up for sale. For instance, the database of customers in a new fund offer (NFO) was for sale for Rs 1 lakh. The database contained details like names of customers, their PANs, telephone numbers, addresses and amounts invested. Distributors say such databases have existed for a while now. Said a leading distributor, “All distributors have access to such databases, which is why they are sold at throwaway prices in the market. Even the database of banks and depositories with names of high net worth individuals can be easily bought.”

Here’s another company that’s openly flouting IRDA norms on prohibition of chain marketing of insurance products

You have to hand it to this company. The name itself—Rose Valley Chain Marketing System Ltd—makes it clear that the outfit is neck-deep in multi-level marketing schemes. And insurance is part of its arsenal. The company, certified by the Insurance Regulatory & Development Authority (IRDA) is a corporate agent of the Life Insurance Corporation of India (LIC) since 2002 and has six lakh foot soldiers pushing various insurance policies across India.

Moneylife had reported earlier (http://www.moneylife.in/article/8/5371.html) on how according to Section (42) of the Insurance Act, 1938, appointing sub-agents and passing on commission or kickbacks is prohibited. When we had approached the insurance regulator on the proliferation of various MLM insurance schemes, along with the details, IRDA's executive director A Giridhar had told Moneylife, “Selling insurance through unlicensed persons is illegal and we will act on the information provided by you.” In addition, IRDA certification is mandatory for selling insurance products.

But here is an example of a company that does not even find it necessary to cloak its insurance MLM business—its name itself is a dead giveaway.

The model operates as follows—a sales executive has to achieve a target of Rs40,000 within 12 months. This is the joining stage. At the 18th rank, a sales executive ‘graduates’ to become a ‘Development Advisor Group 3’.

The products being peddled include LIC policies, along with fixed deposits and recurring deposits of Rose Valley.
A sales executive does not have to pass an IRDA examination, says an official from the company, which is in express violation of the rules.

The official from Rose Valley said, “Once you reach a certain level, you don’t have to work any more; you can earn commission bought by your chain.”

The brochure also says that a ‘marketing executive’ can also recruit a maximum of 15 sales executives.
At the first stage, the annual target is Rs40,000 and at the final stage (the 18th rank) the target is Rs20 crore. This target also includes the business achieved from the lower chain(s).

The group is a huge conglomerate with its finger in many pies. It has interests in real estate, hospitality, retail, broadcasting and IT education & training.

According to the company official, the group is also looking at entering the housing finance loan segment.

Bank of Rajasthan to merge with ICICI Bank

Small private sector lender Bank of Rajasthan said on Tuesday that its controlling shareholders have agreed to merge with ICICI Bank (ICICIBANK.NS : 889.2 -11.9), India's No 2 lender.
No terms were immediately available. Bank of Rajasthan, controlled by the Tayal family, has a market value of $296 million.
Shares in Bank of Rajasthan rose 19.95 percent to 99.50 rupees ahead of the announcement in a Mumbai market that ended up 0.24 percent.
Boards of both banks were to meet later in the day to consider the merger, Bank of Rajasthan said in statement to the stock exchange.
The Tayals, who owned about 29 percent of the small bank at the end of December, according to Bombay Stock Exchange (^BSESN : 16875.76 +40.2) data, have been reported to be negotiating with potential buyers.
In March, the Reserve Bank of India appointed consulting firms to conduct a special audit of the books and accounts of Bank of Rajasthan.
India's markets regulator, the Securities and Exchange Board of India (SEBI), on March 8 issued an interim order restraining the founders and various group entities from accessing the capital markets or from dealing in securities.
Bank of Rajasthan has a network of 463 branches and a customer base of 2 million.
Bank of Rajasthan officials could not be reached for comment while an ICICI Bank spokesman declined comments.

News Round Up

IIML, Aditya Birla PE, Shapoorji Pallonji and US-based Darby Private Equity have shown interest in buying the fund.
Six Firms In Race For Axis PE Buy - Axis Bank, India’s third largest private sector lender, has received bids from six suitors for buying out its private equity arm called Axis Private Equity. IL&FS Investment Managers, Aditya Birla Private Equity, Shapoorji Pallonji group and US-based Darby Private Equity are among those that have shown interest in buying the fund. Earlier in February, the top managers of the company were looking to buy Axis Bank’s interest in Axis Private Equity, but some investors have opposed this move. Axis Private Equity had raised Rs 600 crore for its infrastructure fund in 2008. (ET)
NSR Likely To Hike Stake In INX Media - New Silk Route (NSR), a Mauritius-based private equity firm, is likely to increase its stake in INX Media Pvt Ltd to 80%, from 20% now. NSR is reportedly buying out stakes of some of the existing foreign and domestic investors to hike its stake in the company. NSR has agreed to infuse Rs 55 crore initially and will also pump in more money as per the business needs of the company. INX has been undergoing a financial restructuring since last 10-12 months, and sold its general entertainment channel 9X to Zee Tele Films last month. (FE)
SAIL Looks To Ink JVs With Posco, Others - Steel Authority of India Ltd (SAIL), the state-run steel manufacturer, is looking to form joint venture agreement with Korean giant Posco to build a 2 million tonne plant in Jharkhand. Besides Posco, SAIL is also in talks for multiple ventures with Tata Steel, Arcelor Mittal group and Japanese steel companies like Kobe for greenfield ventures. Reportedly, the Tatas could also set up a 2 million tonne steel unit with SAIL in Bokaro, while ArcelorMittal could set up a 3-4 million tonne in the eastern regions. (DNA)
Prudential May Sell AIG Stake To Tata Group - Prudential, the British insurance giant, may sell its stake in Tata AIG Life to its partner Tata Group. In March, Prudential had acquired AIG's Asia business for $35.5 billion, which included the 26% stake in Tata AIG. Prudential has to sell the AIG stake due to regulatory problems as it already owns 26% stake in ICICI Life Insurance that barred it from acquiring stake in another life insurance venture. Both the firms are reportedly in advanced stages of talks on the price at which the shares would be sold to the Indian conglomerate. (BS)
Shriram Transport To Infuse Rs 600Cr In New Arm - Shriram Transport Finance Company Ltd (STFC), one of India’s leading commercial vehicle finance company, is planning to infuse around Rs 600 crore capital in its proposed subsidiary, for conducting equipment finance business. The funds are expected to be infused in a month. The company has also forayed into gold loan by joining hands with one of the group’s subsidiary. (BS)

Investment in Shriram Transport Finance's NCD makes sense

Shriram Transport Finance is coming with yet another issue of non-convertible debentures (NCD). The issue opens on May 17, 2010, and closes on May 31, 2010. The investor can invest with a minimum sum of Rs 10,000. The company intends to raise Rs 250 crore through this issue with an option to retain over subscription of another Rs 250 crore. The company had tapped the NCD route to raise funds last year too.

The investment in company’s debt gets strength from the fact that it is one of the most successful non- banking financial companies (NBFC) in the country. It is primarily into financing of second-hand commercial vehicle. It is the only company in the organised market providing finance for such kind of customers, which other financial institutions are not comfortable dealing with due to an extremely difficult credit appraisal process.

The company can access the creditworthiness of its borrowers, as it is into this market for the past three decades. And its success is borne by the fact that net non-performing assets form less than 1% of its net advances as at the end of December 2009 quarter. This is one of the best asset qualities in NBFC space in India. And it gives comfort to the investors too.

The salient part of the issue is that this time the company intends to raise 80% of corpus from the retail investors. The scheme is structured in five options. In three of the options the investment is secured and in the remaining two, it is unsecured. While the secured options are rated as CARE AA+, the unsecured have been rated as CARE AA. A point to be noted is that even the unsecured option is rated adequately high by the credit rating agency. So the retail investors can be rest assured that the risk is minimal.

Within secured options, there are three alternatives, wherein an investor can invest for either 5 or 7 years depending upon the duration of investment he is comfortable with. The yield that a retail investor can earn ranges from 9.5% to 10.51% per annum. At a time, when most of the bank’s fixed deposits are not giving a better interest than 7.5% per annum, the company’s NCD issue seems to offer an attractive yield for the retail investors.

The yield is higher for unsecured options. The investor can invest either for six-and-a-half or for seven years. The yield a retail investor can make ranges from 10.75% to 11.25% per annum. The premium over fixed deposit rates is obviously more in case of unsecured options. What makes this issue attractive for retail investors is that the term of investment is quite high i.e. 5-7 years. We are in a phase, where interest rates are on an upward trajectory. At a time, when the general interest levels are already a bit high, this offer provides a premium over and above already high interest rates. So it makes a lot of sense for retail investor to park some funds at high rates for a long period of time.

Moreover, NCDs are going to be listed at National Stock Exchange (NSE). So an investor can redeem his investments should an urgent need for cash arises. Therefore a crucial aspect of investment i.e. liquidity is taken care of. In nutshell, an investment in Shriram Transport Finance’s NCD comes with twin advantages of high return and high liquidity. It makes sense for retail investors to park some hard-earned money here.

Insurance companies keen to grab client details of independent financial advisors

You trust them with your money, you have faith in them as they will guide you to the right financial path, you believe in them as they are completely independent and loyal to their clients. These of course are your independent financial advisors (IFAs). However, we now learn that some of these IFAs are being wooed by insurance companies to part with your contact details.

Companies like Reliance, HDFC Life Insurance, SBI Life Insurance, Aviva Life insurance, Birla Sun Life Insurance and other insurance majors are understood to be inducing IFAs with incentives to get contact details of clients. These are either meant to locate new customers for unit-linked insurance plans (ULIPs) or, simply to poach customers from other insurers.

An IFA gets paid for his co-operation in providing other details of a competitor’s clients to an insurance company. All your details, right from your telephone numbers to email IDs, even residential addresses, are also provided to the insurance company.
This is all part of a desperate attempt by insurance companies to keep selling ULIPs after a very public brawl between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) brought ULIPs sales down to a trickle. Thanks to that imbroglio, many ULIP customers are worried about their investments and are having second thoughts of continuing with premium payments for a product plagued by high default rates. Insurers are trying to reach out to existing and potential customers to dispel doubts and fears.

Secondly, insurance companies need to find other ways to bring in new customers. It is not clear whether they can launch new ULIP products before the courts pick the winner of the SEBI-IRDA fight; so they have to sell more to their existing customer base and need to interact with them directly. Or they have to incentivise IFAs to lure investors from other insurance companies.

“Insurance companies have often come to us to either sell their ULIPs or ask for our contact list in order to create a greater database to sell them directly to the clients,” said a certified financial planner who wished to remain anonymous. He calls this “a routine affair.”


These deals are obviously not done transparently. “There is no paper trail or a
black-and-white agreement,” says Neeraj Bahal, a certified financial planner (CFP), from Fasttrack Investments. Usually, an executive from an insurance company would meet an IFA and tell him about a chance for him to make some money by parting with his clients’ details for a fee. Depending on the deal, the IFA will either part with the data which the insurer uses to contact a potential customer; or, in some cases, the insurance executive will actually accompany the IFA to client meetings to sell a product. This enhances the credibility of the insurance product being sold.

We learn that many IFAs who sold mutual fund products are tempted by the kickbacks from insurance companies after their business was hit by SEBI's ban on entry loads. "Since mutual fund commissions were dwindling and distributors were affected, it created an opportunity for the sales of ULIPs,” said Harish Mohan, managing director, Time Financials (Chennai).
Some distributors have a different perspective. Jayant Vidwans, president of the Society of Financial Planners said, "Sharing of data with various organisations is not wrong.”

Not all IFAs are jumping in to grab the money. “If he is a serious advisor then he shouldn’t be selling his clients’ details. He shouldn’t do that as this is his bread and butter,” says Sumeet Vaid, founder and managing director, Freedom Financial Planners.

The function of an IFA is to provide the best possible financial option for his clients. However, when an IFA’s conduct is influenced by incentives, he becomes just like any other insurance agent and clients’ interests are compromised.