Intermediary under the PFRDA Act

The word intermediary in the PFRDA Act is not loose language. It is a defined term, and the definition decides who needs a licence.

The Act says an intermediary includes the pension fund, the central recordkeeping agency, the National Pension System Trust, the pension fund adviser, the retirement adviser, the point of presence, and any other person or entity connected with collection, management, recordkeeping and distribution of accumulations.

That last phrase is doing real work. It is a function test. If an entity touches the money or the records on the way to a subscriber's pension, it is inside the definition.

And being inside has one immediate consequence. No intermediary may commence any activity relating to a pension fund except in accordance with a certificate of registration granted by the Authority.

So the definition is the gate. Everything else in the regulations — eligibility, conduct, audit, grievance handling — follows from being on this list.

The named categories. Section 9.4 quotes the PFRDA Act, 2013 definition. Six entities are named, plus an open-ended function test:

The registration requirement. The Act's operative sentence is that no intermediary, including a pension fund or a point of presence to the extent regulated under the Act, shall commence any activity relating to a pension fund except under and in accordance with the conditions of a certificate of registration granted by the Authority. A pension fund is in fact defined by its registration — an intermediary granted a certificate of registration under sub-section (3) of section 27.

The eligibility norms. The central recordkeeping agency, points of presence and pension funds must satisfy norms specified by the regulations, including minimum capital requirement, past track record including the ability to provide guaranteed returns, costs and fees, geographical reach, customer base, information technology capability, human resources and other matters.

What follows from the classification. Three things the workbook attaches to intermediaries as a class:

• Grievance redressal. Under the PFRDA (Redressal of Subscriber Grievance) Regulations, 2015, all intermediaries must have a senior management level officer designated as grievance redressal officer, and each branch or office must have a designated officer too.
• Trustee ineligibility. No intermediary of the National Pension System, Director or Sponsor, officer or employee is eligible to be appointed a trustee of the NPS Trust.
• Adviser duties. A retirement adviser must advise subscribers periodically about changes in policy and guidelines, and other information pertaining to intermediaries under the National Pension System including the National Pension System Trust.

Related entities that are not on the list. The Trustee Bank is separately defined by the Act as a banking company under the Banking Regulation Act, 1949, and the custodian is a SEBI-registered entity appointed by PFRDA. Chapter 4 lists them among the NPS constituents alongside the intermediaries.

A fintech company, Arthavedh Technologies Pvt Ltd, plans three separate businesses. Which of them needs a PFRDA certificate of registration?

The first two are intermediaries and cannot commence any activity until registered. So the company applies. As a point of presence it must show a minimum net worth of Rs 2 crore including paid-up equity capital of Rs 50 lakh, a two-year profitability track record, and at least one branch with IT infrastructure capable of electronic connectivity with the CRA.

Now the consequence of being on the list, a year later. A subscriber complains that a contribution was credited to the wrong PRAN. Because the company is an intermediary, the grievance regulations bite: it must already have a senior management level grievance redressal officer, and an officer designated at the branch. It must acknowledge the complaint within 3 days and dispose of it within 30 days. If the matter had not belonged to it at all, it would have had to forward it to the right entity within 3 days and tell the subscriber it had done so.

And one door is now shut to its directors. None of them may be appointed a trustee of the NPS Trust, because no intermediary, director, sponsor, officer or employee is eligible.

Chapter 9, section 9.4, item 1 (Pension Fund Regulatory and Development Authority Act, 2013), carries the definitions block, and the intermediary definition is the one most likely to be examined because it is a closed list of names that a question can test by omission. Chapter 4 lists the same entities as the NPS constituents.

Expect a which of the following is an intermediary under the PFRDA Act question — with the Trustee Bank or the custodian offered as a plausible wrong answer, since both are defined separately. Expect also the registration rule (no activity may commence without a certificate of registration) and the list of eligibility heads the regulations may specify. The NPS Trust being itself an intermediary is a detail candidates miss.

• The NPS Trust is an intermediary under the Act. It is named in the definition, even though it also supervises the other intermediaries. That dual role is the discriminating point.
• The Trustee Bank is defined separately, as a banking company under the Banking Regulation Act, 1949 — not inside the intermediary definition. The custodian is likewise a separate, SEBI-registered appointment.
• The definition says "includes", followed by a function test. It is not exhaustive: any entity connected with collection, management, recordkeeping and distribution of accumulations is caught.
• Registration comes before activity, not after. No intermediary may commence any activity without the certificate.
• Both the pension fund adviser and the retirement adviser are named. They are listed as distinct categories in the Act.
• Being an intermediary triggers the grievance machinery automatically — a designated senior officer at head office and an officer at every branch.
• No intermediary or its people may be an NPS trustee. A candidate who thinks a pension fund director could sit on the Board of Trustees has missed the ineligibility rule.