Suitability and Appropriateness in Indian Context (Mifid tailor made for India)

The Markets in Financial Instruments Directive (MiFID) are already redefining the investment landscape in global markets. Heavy penalties and law suits ruled the world post financial crisis. Why? Because an old lady was sold investment products she did not understand or which are considered more volatile that her blood pressure. Derivatives in this case.

These stories are reducing in global markets, but not so in India.

In India, a brokerage house would call a random number through the tele-marketing cell. Not knowing who is on the call, they would suggest that the person opens an F&O account with the brokerage house. All KYC will be taken care of. The returns are guaranteed to exceed 20% due to option strategies.

The answering person understood nothing except the following
- Open an account
- Get returns over 20%

Naturally, the person is excited and opens the account and starts trading in derivatives based on advice and calls given by the brokerage firm. Voila, a perfect, yet always repeating in each city, example of a failed S&A test. Mis-selling in plentiful.

The quest to remain in business and the make good margins/targets means that investors are taken for a ride and offered products that they either simply dont understand, or those that are not relevant to them.

Watch out for more on this website. To get trained in the onerous requirements of (Suitability and Appropriateness) S&A, please contact Manoj Jain at 98337 67114 or manoj.jain@riskpro.in

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