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Several MFDs and an association wrote to us with this query:
Recently, we read an article on Cafemutual saying that AMFI said that MFDs will have to maintain a record of risk profiling of all clients. However, we did not receive any circular from AMFI in this context.
While we did risk profiling of clients at the time of distributing mutual funds, we have not documented it. Also, we do not fall under AMFI due diligence.
Why does the article say that it is necessary for us to document the risk profile of existing clients?
Names withheld on request
Dear MFDs,
Recently, in an FAQ on do’s and don’ts for MFDs, AMFI has asked MFDs to maintain a proper record of risk profiling of all their clients in physical or electronic form.
However, documenting risk profiling has always been a part of AMFI code of conduct for MFDs.
Irrespective of whether you fall under AMFI due diligence or not, you will have to document risk profiling of all clients immediately.
Further, MFDs will periodically review risk profiling of clients and update it in their book of records. While AMFI has not suggested a specific period of such a review, it is always better to update it once every year.
For MFDs who have not documented risk profiling of clients, VN Chalasani, AMFI Chief said, “Maintaining documented risk profiles of clients has always been part of the MFD code of conduct, those who haven’t done so should take immediate corrective action. MFDs should start by informing clients about the importance of risk profiling, use available tools to profile their clients and maintain records digitally for easy access and to ensure compliance with AMFI guidelines.”
Team Cafemutual recommends you to document the risk profile of all your clients with immediate effect.
