This is an article by Vivek Law about why SEBI is killing financial inclusion. Let me explain some of the ways a regulator works. I have met and spoken to Vivek Law – but not sure if he remembers me, even I have not seen him since his CNBC times.

So before I reply to his article, let us remember the generic rules about ANY industry:

  • the regulator speaks in the voice of the biggest/ most influential player
  • the saying in any language is the same – it is the ‘bali ka bakra’ never bali ka haathi or bali ka sher
  • there is nothing called ‘regulator memory’ each baboo(n) comes with some pet project and he believes it works
  • regulator’s stay and next job depends on what he does here
  • baboo(n)s never retire by choice – God calls them over, and that is the way the end happens.
  • a baboo(n) who takes on the government or pretends to try that is just seeking publicity, NEVER believe it.

The MF regulator said ‘all those who want to sell mutual funds should pass an exam’ – I was a huge beneficiary of this amazing requirement, which may/may not have helped the industry.

The MF regulator was helped by one man (a big big beneficiary will not name him) in bringing this change – and they broke the back of UTI which had a huge network of agents. So suddenly all the mutual funds were on par. When Irda tried this, LIC made sure he lost his voice in just a few seconds. End of story.

One regulator of mutual funds tole me ‘a mf should be judged by how many offices it has’. No I did not laugh. I almost died.

Vivek has said ‘there are 40,000 IFAs selling mutual funds’ – people earning at least Rs. 300,000 p.a. from this business would perhaps be ABOUT 3000, so you can safely ignore 37,000 part time agents. They do not matter.

Sebi has bureaucrats – and sometimes journos on its thinking panel. It is the IFA who meets the clients and bears the brunt of a Prashant Jain non performance or a Sunil Singhania buying large cap in a mid cap portfolio. These interactions are not polite. They are BC, MC…..’you did not tell me this will happen’.

Sebi feels that the IFA decides what the investor  should do. Yes for the top 1000 agents, perhaps. The next 19,000 get bullied by the clients Рso the regulator should do a proper survey on what the IFA really does, till then regulating the IFA is a joke.

Vivek asks why do they not act against the banks. The bigger question is why do regulator allow products which are extremely manufacturer centric – the Classic Endowment plan of the Insurance sector? We have never tried answering this question Mr. Law. The media too needs the regulator to come as a chief guest, right? Let us try to answer why the manufacturer is allowed to make shit before we blame the IFA for selling (or mis-selling shit).

Vivek, the Golden Rule of Life is that the man with the Gold makes the Rules. Did you see any regulator trouble the auditor who signed Satyam and Global Trust bank? Fact of life.

In most of the cases the Regulator is used by a few top people in the industry to make sure that the new entrants find it very difficult to enter, survive or thrive. See the actions of SEBI in this light. The MF industry is dominated by a few very very powerful players. If the new entrant has to come in (raise the net-worth consideration!!), kill the IFA (banks will not risk a new comer MF who cannot pay an arm and a leg as commission), and help maintain status quo.

So the banks will never be hit. Nor will IRDA allow products to be investor friendly – who will buy the GOI bonds at 7.45% p.a. when retail inflation is 12% p.a. Only a lunatic, right? Or somebody who is forced to. How many articles have we seen talking about the worst BFSI product available to the retail lunatic – the Futures and Options? what is sebi doing? Playing the violin?

‘Evidence based investing’ is difficult. ‘Evidence based regulation’ is impossible. Kill a few IFA, stand up in parliament and say ‘we killed a few IFA will be met with a loud applause’. End of story. No significant body hurt. Now imagine prosecuting a HSBC for mis-selling to Suchitra Krishnamurthy. Let us be clear if Debashis and Sucheta had not put in effort Suchitra would still be ruing her decision to go to HSBC and giving them a power of attorney. How many Suchitras are unable to reach a Sucheta will never be known..and how long will Sucheta do this is a nice question to ask. One Priyanka in Cnbc, or one in some other place will not make a difference. Every baboo(n) needs to have a ‘I am remembered for this moment’. The current chief thought it was RIA…he is wild that 100,000 IFAs did not sign up in a day. He now hopes it is Online selling. So if he can sell say Rs. 100,000 crores of mutual fund in one day thanks to Flipkart and Amazon, he will be known for that, right? (ok, ok, this number is a joke, so please do not take it seriously)…

There is nothing to tell me that India is now a nice place to invest.

You know what I tell the girls? Only one person who can save you from a potential rapist is YOU YOURSELF. Create the mind strength and physical skills and strength to kick the potential rapist in his balls. Maim him or kill him. Your bodyguard or driver may be the potential rapist – who will save you from him?

Financial Learning (the initiative has to be from the investor) is the only protection.

Ha that brings us to another amusing regulator pass time – Investor Awareness Program. We will talk about this when we meet Vivek.


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  1. Let us name the baboo(n)s on social media and record their misdemeanors on social media with the Hashtag #sebibaboon and his action.

  2. IFA agents should team up and form their own lobby like what Nilesh Shah was referring to as Amulisation of IFAs.

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