Following SEBI advice, AMFI has asked all fund houses in the country to comply with the all new 'Know-Your-Distributor (KYD)' norms before the grant or renewal of registration of distributors.
From September 1, 2010 it is mandatory to comply with the KYD procedure before applying for fresh ARN Registration/ARN Renewal. Existing ARN holders are required to comply with KYD norms within six months or by the end of February 2011, failing which payment of commission will be suspended till ARN holders comply with KYD requirements.
SEBI wanted AMFI to make the registration process for distributors more stringent. Previously, the grant of registration required clearing an AMFI examination, two photographs and payment of a registration fee.
However, pursuant to a directive from SEBI, the AMFI certification has already been replaced by a certification programme for distributors conducted by the National Institute of Securities Markets (NISM) from August 1.
Now, AMFI has sent a mail to mutual fund houses stating that on account of increasing cases of financial frauds by distributors and their employees it has been decided to tighten the distributor registration procedure. Also, such barriers to entry would remove the non-serious agents.
The new KYD norms would require distributors to go through a stringent verification process that would look into the past record of the distributors to minimize the risk of mis-selling.
AMFI has engaged the services of Computer Age Management Services Ltd. (CAMS) to carry out the KYD process through their centers referred as "CAMS POS". CAMS would provide KYD facilities at 60 POS, which would later be expanded to more centers.
According to AMFI, CAMS has agreed to provide the facility on a temporary basis at places other than these POS if requested by AMC and if the number of distributors is not less than 50. The details of POS will be uploaded on AMFI and CAMS websites.
For the time being, AMFI would not charge from ARN holders for carrying out KYD process.
New KYD procedure
The new KYD procedure requires distributors to visit the Point of Service (POS) in person with the following:
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Duly completed KYD application form
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Self-attested photocopies of relevant documents for address proof, identity proof, PAN and bank account details.
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Two self-attested (passport size) colour photographs.
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The original documents for over-the-counter verification.
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The biometric process is to be completed at the POS, at the time of submission.
Distributors will then obtain the acknowledgement from the POS confirming completion of KYD process. Existing ARN holders are required to send a photocopy of the acknowledgement to the AMCs/RTAs confirming KYD completion.
In case of non individual entities, bio-metric is required to be carried out for the authorized persons/ officials as indicated in the below mentioned table:
|
Category of ARN holder |
Persons required to undergo bio-metric process |
|
Proprietary Concern |
Proprietor |
|
Partnership firm |
All the Partners |
|
HUF |
Karta of HUF and the signatory to the application (if the signatory is a person other than the Karta). |
|
Societies & Trust |
Principal Officer/Chief Trustee and the signatory to the application (if the signatory is a person other than these officials). |
|
Corporates (Pvt./ Public Ltd. Co., Banks, NBFC) |
Authorized official who has signed ARN application |
Bio-metric process
A biometric identity card is similar to identity cards but also contains biometric information. Put simply, biometric information is information about a specific person's body.
For KYD norms, it involves taking impression of right hand index finger and registering the same for identification purpose. The process will be carried out at the CAMS POS at the time of submission of applications.
Some distributors are not happy with the new KYD procedure saying they find it burdensome. However, such a step by creating more credibility for IFAs, will be beneficial for all stakeholders in the long run.
