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One of our readers wrote to us with this query:
I am an AMFI registered mutual fund distributor. I primarily cater to NRI clients. I would like to understand if I can distribute schemes offered by AMCs from GIFT City.
If yes, what is the criteria and do I need to set up office in IFSC?
Agrim Jain, Delhi
Dear Agrim,
Yes, MFDs can distribute mutual fund schemes, PMS and AIFs offered by AMCs and other registered entities from the International Financial Services Centre (IFSC) situated in Gujarat International Finance Tec (GIFT) City in Gandhinagar.
The International Financial Services Centres Authority (IFSCA), the single regulator for all financial products in IFSC – mutual funds, stocks, PMS, AIFs, insurance and pension allows distributors to either become a registered distributor of IFSC or directly tie with registered entities to sell products listed in IFSC.
However, the former will require you to set up office space in GIFT City, pay registration, annual registration and non-refundable fees and comply with net worth requirement of USD 50,000 (Rs.41.96 lakh), among other things. Also, this requirement is mandatory only for large distributors who have other lines of business in IFSC like banks, wealth management and so on.
Individual MFDs can have direct tie up with AMCs and other registered entities like PMS, AIF, insurance and so on.
However, all the distributors will have to abide by the code of conduct irrespective of whether they are registered with IFSC or empanelled with registered entities.
Sudhir S, Principal Officer and Head – Gift IFSC Branch, Aditya Birla Sunlife AMC told Cafemutual that individual MFDs can have tie ups with multiple AMCs. Registered entities or AMCs will be responsible to ensure the due diligence of their distributors, he added.
Sudhir further said that there is no rigorous requirement to distribute IFSC products like examination, networth and so on. Individuals having experience in dealing with clients’ money like mutual fund distributors and investment advisers can empanel with IFSC registered AMCs. He told Cafemutual that his company has added close to 100 MFDs so far.
Another AMC official having office in IFSC requesting anonymity said that MFDs catering to NRIs should register themselves with AMCs in IFSC considering the easy KYC norms to onboard new clients.
There is no need to do stringent KYC of clients. IDs like passports and utility bills are adequate. Also, there is no need to invest through NRI or NRO accounts. All transactions can be executed through any foreign bank account. However, transactions have to be done in dollars.
Currently, NRIs and foreign nationals can invest in inbound funds i.e. funds which invest in Indian markets through direct stocks or mutual funds. Resident Indians can also invest through IFSC provided the fund should have outbound structure i.e. funds investing in other geographies.
Investors will have to invest a minimum of USD 1.50 lakh or Rs.1.25 crore (in today’s term). Moreover, investors have an option to invest in tranches of six months or 1 year.
