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  • MF News AMFI seeks clarification from SEBI on payment of withheld commission

    AMFI seeks clarification from SEBI on payment of withheld commission

    There is a confusion if three months window is applicable on assets with pending KYC.
    Nishant Patnaik Apr 2, 2019

    AMFI has sought clarification from SEBI on the payment of withheld commission of distributors.

    On February 21, 2019, SEBI asked fund houses to pay withhold commission to distributors within three months i.e. until May 21, 2019. AMCs have withheld commission including upfront commission due to a number of reasons such as failed transactions, incomplete KYD and so on.

    However, there is a confusion among fund houses if this three months window is applicable on assets with incomplete KYC.

    A CEO of a large fund house told Cafemutual that AMFI has requested SEBI to issue clarification in this regard. “Since the market regulator has said that we have to pay withheld commission within three months subject to fulfilment of all requirements, there is confusion if it is applicable for pending KYC cases. So far, we have withheld commission on assets with pending KYC and paid it later to distributors once they complete KYC on such assets. Hence, in my view, this three months window is applicable only for distributors who are not KYD complaint.”

    A Mumbai distributor who manages close to Rs.1000 crore said that completing pending KYCs of clients within three months is a herculean task for distributors. “There are instances where the client is not in the country or stays outside Mumbai most of time. In such a scenario, how would distributors ensure that they complete pending KYC in stipulated time?”

    Industry experts believe that many investors who invested before January 1, 2012 did not comply with KYC norms due to frequent changes.

    Have a query or a doubt?
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    19 Comments
    Amit rathod · 4 years ago `
    Many things happening are so illogical that we r unable to understand the reasons behind it. If regulator wants to comply with KYC . Than why AMC is allowed to charge expense on such assets. Only expenses to the extent of management fees should be allowed , till KYC is complied on such assets.
    SANTOSH ROY · 4 years ago `
    Distributors abide by the Rules framed time to time. Hence, at the time of soliciting business, distributor has taken care to comply the rules. The Regulator SEBI now framed certain rules which they want to comply with by all - even when the rules were non existent then. If this is the case, then it is primarily SEBI's responsibility how to engage AMCs and Investors and Distributors to get this done for the Whole Industry. Did SEBI or AMFI made any publicity campaign to make Investors aware that PAN and KYC is must even for old investments ? No. Very convenient ways of dealing such matters, isn't it ?

    Investor himself is not bothered because he is not affected and not knowing the consequences. Why Only Distributor is shouldered with this responsibility ? Its a Industry concern. All stakeholders (AMC, RTA, AMFI) should work towards it, including SEBI. What communication RTA/AMCs sent to these investors to comply PAN/KYC Rules ? Why AMC Charges and RTA Charges not to be withheld ?

    It is disheartening to note such apartheid attitude towards distributors.
    Sanjeev Anand · 4 years ago
    100% agreed with Mr.Santosh Roy.
    srinivasan v · 4 years ago
    when you have not paid the distributor the commission amount for the account no kyc compliance. Alternatively they can inform investors to comply the same. if no reply comes you please credit the same to investors bank account. send three or four reminders to investors. if he fails to do it. you please return the money to investors. It is also part of the AMC duty to collect such information from the investors.
    Nishikant Awadhut Rotkar · 4 years ago
    Completely agree with Santosh Roy. most of the pending KYC cases are of the Investors who invested before 2009 when even PAN is not compulsory. due to which there is name mismatch in investment name & PAN. many kyc cases of my investor are rejected only due to name mismatch. also Signature mismatch is very common as the investment is made 10 years - 12 years back & with due time sign get differ.

    So, Even if distributors try their best to comply with KYC norms, its not an easy task. It is not the sole responsibility of distributor to comply with kyc norms. its an collective responsibility of AMC, Investor, RTA & distributor. to withheld the brokerage of the distributor shows insensetivity & foolish attitude of the regulator.

    neither AMC nor the RTA has taken any steps or communication with investor to make aware about mandatory kyc compliance.

    Reply
    V srinivasan · 4 years ago `
    I completely agree with Mr. Santosh Roy's views.
    Sankarsan Rath · 4 years ago `
    Amc should communicate to thoseinvest
    sanjay · 4 years ago `
    as per my view Sebi apply new rule that if kyc is not done then all money refunded to client. amc are not able manage funds of those client which kyc is pending. so that if amc want to continue manage that
    investors funds then he also try to complete kyc from client.
    dHIREN sHAH · 4 years ago `
    I think that if the commission of the distributors is to be held back for non compliance of KYC than similary all amc should also not be allowed to charge any fund management. Best is SEBI instructs AMC's to send that money back. This is very easy to just simply hit the distributors. KYC compliance is the sole responsibility of the distributors only? SEBI, AMC's are not responsible for this? Why should the brunt of this be borne by the distributor alone??
    Vinod kr singh · 4 years ago `
    I am agree with Santos jee
    Dipak Doshi · 4 years ago `
    Yes. The day commissioned is stopped by Amcs, from that day onwards, asset management fees should not be allowed to be charged by amcs. This is ridiculous that every time SEBI/Amcs make IFA a scapegoat, since both have some responsibility towards investors too.
    Prashant · 4 years ago `
    This is an eyewash. AMCs don't want to pay the brokerage and have already claimed that in their books of account so they want to make extra profits by eating away our commission which is our right. Shame on everyone to eat our hard earned money and shame on us for letting them do this. Jaago distributors jaago.
    D B DESAI · 4 years ago `
    I agree with Mr. Santosh and further why AMCs should not be instructed to send letters to the such investors with a request to contact their Advisors and get the KYC procedure completed. Withhelding commission on the ground is CRUELTY. In case the money is withdrawn, it will go the bank account where KYC is done. Why expenses on such assets should be charged? Stop charging it.
    Vinod Shiralkar · 4 years ago `
    In my city no AMC accepts application with out KYC documents if the investor is new.
    If after that the KYC is on hold for 3 to 4 year's who is at fault?
    The KYC issuing authority?
    The AMC?
    SEBI?
    Or
    Distributor?

    I don't know why only me(Distributor)is punished by not paying his remuneration.
    Is AMC is going to pay the pending bills along with interest?
    vijay oswal · 4 years ago `
    Require clarification on brokerage withheld due to pending ARN Renewal. Please explain
    Rajesh Sethi · 4 years ago `
    I am afraid that where the mutual fund business is transfered from one company to another and in the begning there was no kyc norms also the AMC's have withheld or clawed back the commission for even thoe whose KYC is in place with other AMC's Since theres no one point of service where KYC done in One AMC the other does not update the same.The Problem would have been solved if KYC for Mutual funds Banks and other services were the same instead of submitting the same set of documents for various types of financial services.The idea of KYC is to stop money laundering.But what has happened earlier cannot be reversed now.Mu suggestion is that instead of putiing the onus only on distributors is not fair as for new investments witout KYC no one can invest but for Remption there's no requirement of KYC.As any money laundering happened earlier would plug this loop hole.
    As the investor is only bothered to comply when his payments are stuck otherwise he feels there's no hurry as he can always redeem.
    There has to be two way traffic only getting hold of the distributor by stopping his brokerage is not the solution as all the inestors way back have either changed their address or contact detais nor has approached the AMC nor the distributors getting hold of them is next to impossible and all the hard work done by the IFA's is gone by the drain.
    I would request SEBI and AMFI to please consider our grievance and come out with a viable solution holding the brokearges is absolutely impractical.

    A.M.Sugunasundaram · 4 years ago `
    The SEBI before initiating such a troublesome job it should bring for only prospective investments, and for retrospective investments it should allow the AMC's sufficient time to do the KYC. If not done AMC's may be directed to credit the proceeds to Unclaimed Accounts asking them to transfer to Govt. of India. I am of the opinion that SEBI should a directive to AMFI/AMC's to transfer all the funds to Government immediately, as un claimed. Why the burden is only on Advisor.
    FALGUNI MANOJ SAMPAT · 4 years ago `
    ARN-0932
    FALGUNI MANOJ SAMPAT · 4 years ago `
    IN COMMISION STATMENT THEY SAYS WHAT AMOUNT WITHOLD AND NAME OF INVESTOR WITH MISSING KYC AND PAN IN MANY CASES AMOUNT INVESTED IS ZERO
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