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.