Ask Us MFDs have to explicitly tell their clients that regular plans pay commission to MFDs

MFDs have to explicitly tell their clients that regular plans pay commission to MFDs

Ask us: MFDs offering online transactions should disclose ‘Regular plans involve payment of commission to MFDs’.

Nishant Patnaik Feb 7, 2024

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One of our readers wrote to us with this query:

AMFI code of conduct says that MFDs will have to put a disclaimer that regular plans involve payment of commission on website. I would like to know about its applicability and positioning.

Name withheld on request

Dear MFD,

Yes, MFDs facilitating online transactions on their website will have to explicitly tell their clients that regular plans pay commission to MFDs.

MFDs offering such a facility on their website should give a disclaimer that ‘Regular plans involve payment of commission to MFDs’.

Ideally, MFDs who directly facilitate online transaction or MFDs who have integrated their website with other transaction platforms like BSE Star MF, MF Utility and NSE NMF II should put this disclaimer on their website.

However, you may be exempted if you do not offer any transaction facility on your website.

In addition, AMFI has also asked MFDs facilitating digital transactions to prominently display their commission structure from different competing schemes across fund houses through a hyperlink.

In its code of conduct, AMFI said, “According to SEBI, MFDs cannot deal in direct plans. MFDs shall ensure that on any digital platform provided by MFD for offering investment facility to investors, it is categorically disclosed that the scheme the investor is subscribing to is of ‘Regular Plan’ which involves payment of commission to MFD. The link for the rate of commission received or receivable by the MFD for the different competing schemes of various Mutual Funds shall be prominently displayed on the platform indicating the same as a hyperlink. Further, a link to the AMFI Code of Conduct for Mutual Fund Distributors scheme offer documents (SID/SAI/KIM) shall also be prominently displayed on the concerned page.”

Hope we have addressed your query.

Regards,

Team Cafemutual

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15 Comments

krishnan · 10 months ago `

i think the same should be applicable to LIC /Insurance agents also

anil kumar · 10 months ago

truly said

krishnan · 10 months ago `

In addition, AMFI has also asked MFDs facilitating digital transactions to prominently display their commission structure from different competing schemes across fund houses through a hyperlink

can someone let me know where we can get this info of commission structure from different competing schemes

InvestAir Funds · 5 months ago

AMFI should ask RTAs to provide feed to the MFDs about ongoing brokerage structure in CSV, DBF, XLS format. Then only this is possible.

Smartinvestmdu · 10 months ago `

as well as the AMFI/SEBI need to insist show all the AMC website that what are the probabilities they may face loss of principal while investing in direct plans instead of Regular, that should be subject head as CAUSE OF DIRECT PLANS

Vivek Shah · 10 months ago `

How about forcing AMCs to display how much paid to fund manager and how much they take as profit.

Dwarakanath Mysore · 10 months ago

Will the AMC's display the compensation paid to their Top Executives prominently on their website

Imadadali Masi · 10 months ago

All is for MFDs only....not for insurance compnies and not for banks...

Suraj Jatwani · 10 months ago `

Thanks to AMFI for sharing this and i welcome this step. i would be happy if AMFI provide standard format for website and hyperlink.

varun jain · 10 months ago `

Govt should start disclosing commission and profit Sharing in all Industry like Auto, Pharma, CD, FMCG. Why only Mutual fund commission is disclosed. If it has to be transparent than it should be in all the industries...

cyprian g sequeira · 10 months ago

commission should be displayed on all products and services

InvestAir Funds · 10 months ago `

If the investor is a so naive that he/she doesn't know about the commission, he/she needs Distributors help and if he knows, there's no point in telling explicitly.

However, I do tell my clients how I will earn/get commission and compare it with an Insurance Agent, they feel pity and express surprise how I survive. 🤣

But banks should follow it. The foreign trip to higher bosses and sales target to bank employee dealing with the costumer should be disclosed.

Moreover AMCs should display on their website why difference between the TERs of Regular and Direct Schemes is not paid to the MFDs and where the money is going.

Lastly, so called free platforms like Kuvera/ET Money etc should display how do they earn and it shouldn't not be hidden in long list of T&Cs.

Durgesh Tyagi · 10 months ago `

Zerodha and Groww both selles regular and Direct plans but not display such disclaimer. Grow is also an AMC and also a transaction execution platform and a broker too. HOW?
Zerodha is also a Broker and sells direct plan too How.?
1.
if an investor who is actually an investor wants to know the commission he paid in terms of buying regular plan, he should move to particular AMC not to the distributor because distributor does not charges directly from investor but from AMC.
2. Displaying hyperlink on website containing Brokerage structure of MFD would breech the Code of business in good faith between AMC and Distributor, which will lead investor to ask commission from distributor rather then going to direct plan in certain cases.
3. Displaying Brokerage structure on website will be available for a person also who is not actually an Investor but wants to invest or a prospect. What is the sense of showing his remuneration to a person who is not an actual customer.
4. Commission disclosure should be applicable on all financial products which are associated with money whether it is loan, Mutual Fund, Insurance, FD,Gold Loan, Stocks, irrespective to only one particular product.
5.AMFI should have chosen its board of members from B30 Cities including individual MFD. AMFI is an Association of mutual funds in india and MFD holds largest percentage in terms of total AUM in industry.
6. Board of Members from AMFI should have be changed every year. Chairman should be changed any CA or CS MFD too.

InvestAir Funds · 5 months ago `

I showed the commission structure to an aware investor. He asked me why the commissions are very low and they should be equal to the differences of TER between the direct and regular schemes. Otherwise, so-called free and direct Mutual Fund apps' advertising should be declared misleading. AMCs are not disclosing where the remaining TER is going.

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