MFD vs RIA: what a mutual fund distributor can and cannot do
A mutual fund distributor earns commission from AMCs on Regular Plans and may give advice only incidental to the products they distribute. A SEBI Registered Investment Adviser (RIA) charges the client a fee, uses Direct Plans and needs separate registration. One individual cannot be both, and the same client cannot get both services from one group.
Side by side
| Mutual fund distributor | SEBI RIA | |
|---|---|---|
| Registered with | AMFI (ARN), after NISM V-A | SEBI, with separate exams, net worth and audit |
| Paid by | AMC, as trail commission | The client, as a fee |
| Plans used | Regular Plans only | Direct Plans |
| Advice | Only incidental to the MF products distributed | Personalised investment advice |
| Name | Cannot use "Adviser", "IFA", "Wealth Manager" | May use adviser titles |
The segregation rules (IA Regulations, Reg 22)
Reg 22 was substituted by the IA (Amendment) Regulations 2020, notified 3 July 2020 and in force from 30 September 2020.
- 22(1): an individual Investment Adviser shall not provide distribution services.
- 22(2): the family of an individual adviser shall not distribute to a client that adviser advises, and the adviser shall not advise a client who receives distribution from their family. "Family" means the individual, dependent spouse, dependent children and dependent parents.
- 22(3): a non-individual adviser must keep client-level segregation at group level. The same client gets either advisory or distribution within the group, not both. PAN is the control record.
- Reg 22A: an adviser cannot take implementation fees, commissions or referral fees from advisory clients, directly or through group or family.
- Compliance is certified every year by an auditor (individual adviser) or statutory auditor (non-individual).
- Charging advisory fees or holding yourself out as an adviser needs RIA registration.
Direct Plans and data
- MFDs cannot transact in Direct Plans, and an ARN must not be tagged on a Direct Plan application. Tagging is a compliance violation.
- Direct Plan data feeds go only to non-distributor intermediaries such as SEBI RIAs (and PMS or stock brokers per SEBI clarification), with investor consent. Not to MFDs.
- Since June 2024, AMCs and RTAs must not send MFDs statements showing investments not routed through that ARN, such as an investor's Direct Plan holdings. MFDs use RTA mailback services, and any statement shared covers only that ARN's transactions.
- Execution Only Platforms for Direct Plans (SEBI circular 13 June 2023) come in two categories: agents of AMCs registered with AMFI, and agents of investors registered as stock brokers. They cannot offer Regular Plans.
What is changing
SEBI formed a 12-member working group in February 2026 on the MFD framework: scope of MFD advice, overlap with RIAs, licensing, compliance, conflicts and a possible "deemed RIA" route. MFD associations asked for the status quo in June 2026, and a SEBI executive director said in August 2026 that the final report was expected shortly. As of 4 October 2026 no report or consultation paper has been published. We will update this page when it is.
Frequently asked questions
Can a mutual fund distributor give investment advice?
Only advice incidental to the mutual fund products they distribute. Personalised advice for a fee needs SEBI Investment Adviser registration.
Can I be both an MFD and an RIA?
Not as an individual: Reg 22(1) bars an individual adviser from distribution. A group must segregate at client level, so one client gets either advice or distribution.
Can an MFD sell Direct Plans?
No. MFDs cannot deal in Direct Plans, and tagging an ARN on a Direct Plan application is a compliance violation.
Can an MFD see a client's Direct Plan holdings?
Not through AMC or RTA feeds. Since June 2024 statements to MFDs cover only that ARN's transactions; Direct Plan feeds go to RIAs with consent.
Is SEBI changing the MFD framework?
A SEBI working group formed in February 2026 is reviewing it, including a possible deemed-RIA route. No report has been published as of 4 October 2026.
Sources
- AMFI Master Circular for MFDs (AMFI/MFD-CIR/32/2025-26, 14 Jan 2026)
- SEBI (Mutual Funds) Regulations, 2026
Also drawn from AMFI and SEBI circulars cited in the text. Rules change often; check the latest circulars before acting.
This guide summarises AMFI and SEBI rules as of 4 October 2026 for information only. It is not legal or regulatory guidance. Rabbit Invest is a software platform for mutual fund distributors and is not an Investment Adviser under SEBI IA Regulations 2013.