Sales, distribution and other non-core services: permitted boundaries
The line between advice and sale
An adviser may offer implementation/execution services and distribution - but the law insists the two businesses be segregated: separate personnel, separate infrastructure, separate records and separate revenue accounting, with written client consent and clear disclosure of the capacity in which the firm is acting in each interaction. If the firm distributes mutual funds it needs the AMFI ARN; insurance distribution needs the IRDAI licence; real-estate or estate-planning services must comply with their own laws. Non-core services such as financial planning, tax planning, estate planning and execution support are permissible so long as they are disclosed, do not dilute the fiduciary standard of the core advice, and do not become a disguised route to undisclosed commission.
The governing principle
The client must always be able to tell whether the firm is advising (fiduciary, fee-based, conflict-minimised) or selling (as agent of the product provider, remunerated by commission). Blurring the two is the single most examined misconduct.
Traps
- Assuming an adviser may keep an advisory fee and also take commission on the same recommended product without disclosure and consent.
- Treating "sales" language - assured returns, "best scheme", guaranteed capital protection, limited-period urgency - as marketing freedom. These are misrepresentations under the PFUTP Regulations.
- Believing a registered adviser's registration status legitimises an unregistered activity (e.g., unlicensed insurance advice).
- Forgetting the revenue cap/limits that SEBI may prescribe for non-core activity; whenever a numerical limit appears, verify the current figure rather than relying on memory.
Rule of thumb
Before every sales conversation ask: am I being paid by the client or by the product provider? The answer determines what must be disclosed in writing, what consent must be taken, and which register (IA or distributor) governs the act.