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MF News IAPs have to be funded from scheme: SEBI

IAPs have to be funded from scheme: SEBI

SEBI has clarified that fund houses can fund IAPs from AMC books only if such expenses exceed 2bps.
Team Cafemutual Mar 8, 2019

SEBI has asked fund houses to fund investor awareness programs (IAPs) from their scheme accounts.

As per SEBI norms, mutual funds/ AMCs should annually set apart at least 2 bps on daily net assets within the maximum limit of TER for investor education and awareness initiatives.

However, AMFI asked SEBI if fund houses could fund IAPs from AMC books. AMFI asked, “It may be clarified that expenditure in connection with investor education may be borne by both AMC and schemes, i.e., the expenditure towards investor education and awareness initiative need not mandatorily be charged to the schemes.”

However, SEBI in its response to AMFI clarified that fund houses can fund IAPs from AMC books only if such expenses exceed 2bps from schemes.

SEBI said, “The request of AMFI in this regard is not acceded to. Any expenses towards investor education and awareness initiatives in excess of the amount set apart through 2 bps shall be borne by the AMC.”

AMFI data shows that 35 AMCs have conducted 8,203 programmes in 211 cities covering over 4.03 lakh participants across the country in FY 2016-17.

So far, 40 AMCs have conducted 72,257 programmes in 485 cities, covering over 25 lakh participants between May 2010 and May 2017.

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Rajesh Hattangady · 2 weeks ago
IAP (Investor Awareness Programmes) are the need of the hour. Financial Awareness has to be spread far and wide.
However what perplexes me is that most AMC don't allow IFA (Independent Financial Advisor) to conduct IAP and entrust this important task to external agencies. It's akin to saying that a Doctor has passed his exams and yet he has to depend upon a non Doctor professional to spread awareness
Amalaraj Marian · 2 weeks ago
Now this is like " Setting the cat loose amongst the pigeons'' Smaller Schemes & AMCs will face pressures. This would end up being unfair. Yet the central aspect of Financial Literacy is critical yet this may now have the wind gone from the sails effect... We may see the waning effect sooner than later.
Suraj Jatwani · 2 weeks ago
Dear sir

Amc provide cocktail parties to existing investors on the name of IAPs....Might be it's for IAPs for educate client and acquire new clients.. Amc make fool to investor and ifas....
Vikas Gupta · 2 weeks ago
Somebody dared to write at least.
Arvind Thakur · 2 weeks ago
Kharche ka Direct k account main kitna hissa jayega aur regular k account main kitna
Sachin J Sangle · 2 weeks ago
IAP is good initiative but there were many instances where it was used to promote only direct plan only.
Sachin J Sangle · 2 weeks ago
IAP is good initiative but there were many instances where it was used to promote only direct plan only.
Sachin J Sangle · 2 weeks ago
IAP is good initiative but there were many instances where it was used to promote only direct plan only.
Vikas Gupta · 2 weeks ago
It should be made mandatory for the amcs to communicate all the ifas of the district where iap is to be conducted to have transparency.
Dillip Kumar Swain · 2 weeks ago
Rati · 2 weeks ago
Many advisers also abuse IAP. In name of IAP they want their office integration, musical event, sponsor to colleges, free lunch etc
ANURAG DUREHA · 2 weeks ago
I am a bit confused about what exactly SEBI wants. On the one hand it is mandatory for any advisor to have certain level of knowledge and pass a exam but on the other hand SEBI is promoting direct schemes to retail investors without even ensuring if they have basic knowledge about mutual funds. Now, SEBI also wants AMCs to spend on IAP - so they accept that retail investors lack knowledge. What exactly SEBI's understanding about investors is and what exactly they want ?
K v raghupathi · 2 weeks ago
IAPs are conducted to elaborate the concept of mutual fund investment and not scheme specific. AMCs are projected as a whole and not promoting any specific fund for investment. Then, how such expenses are to charge to a scheme and not to the AMC. Both SEBI and AMFI owes an explation as 2 bps are paid by investors for the purpose.

DBDESAI · 2 weeks ago
I agree with Rajesh Hattangady but at the same time if an external trainer, speaker or expert from AMC can do it better than the IFA it would benefit the IFA also. But the ultimate objective should be to empower the IFA to do it. Money wise, too much cost is allowed on external faculties. One size fits all should not be applied. Individual solutions should be developed.
MADHUMITA GHOSH · 2 weeks ago
IFAs should first become competent in terms of knowldge to conduct an IAP. While training I have seen harlsy few IFAs have knowledge of basic fact sheet contents.
Mohan Jangid · 2 weeks ago
As per SEBI circular IAP expenses are again charges to scheme not exceeding 2bps.

Now two question arise and first one is, to which type of plan whether regular or direct. Because IAP are basically designed to create education and awareness among investors in open market hence it should be charged to direct plan only.
Second question is why should I borne expenses of IAP when I do not need such awareness programme. Our good regulator has addressed various aspects of the schemes, AMCs and other relevant parameters now need to address this also
P.K.S.Sengar · 1 week ago
IAP expenses as allowed to be charged to scheme within permissible limit.
Now this requires attention as there are 2 schemes- Direct and Regular.

Shall AMCs charge IAP expenses to Regular scheme where the investor is already made aware of (guided upon or educated for) his/her investments in mutual funds the investor by the advisor? And AMCs are also keen to levy IAP expenses to those investors under Direct plans who already know the knitty gritty of MFs and invest directly to avoid charges.

The million dollar question ahead of SEBI is to adress that why IAP expenses charged to schemes -Direct scheme (where Investor already knows) or Regular scheme (where Investor has been made aware of his/her investment in Mutual Fund scheme).

Some of forum members have already raised concerns over misuse of funds in the name of IAP, low delivery content and poor presentation of facts in general in such programmes, relatively higher focus on scheme performance of AMCs organising the IAP and the fake representation of the number of attendees in most of the IAPs. Some AMCs pretend to have their own business interest subdued by getting IAP conducted by outsourced agencies/ persons.

In my opinion, SBI shall let loose the asset Management Companies to market their own product by any name and not give them any room for additional expenses in the name of IAP. The enrollment of Resource Persons by SEBI is already in place to serve the purpose.
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