Industry experts believe that the recent SEBI circular in which the market regular had asked AMCs not to spend IAP corpus on mutual fund distributors has been misinterpreted. In their opinion SEBI asked fund houses not to compensate distributors with additional payouts for creating awareness about mutual funds among their clients.
An AMFI board member requesting anonymity said that AMCs could continue to organise IAPs with distributors. “There are two ways to conduct IAPs. One is to remunerate distributors for IAP logistics. Another way is to pay vendors directly and take the help of IFAs, asking them to share their knowledge without any compensation. They have domain knowledge and access to investors.”
Earlier, the CEO of a large fund house told Cafemutual that many AMCs do not have the bandwidth to carry out IAPs on their own. “MF distributors deal with investors on a day-to-day basis. They can conduct IAPs and ensure that maximum number of participants attend their programmes. For us, MF distributors are the touch point to connect with investors,” he said.
In a letter to AMFI, SEBI pointed out instances where AMCs have used IAP corpus to create awareness among distributors’ clients through the distributor websites or magazines. SEBI said, “It has been observed that AMCs are conducting IAPs on distributor’s platforms viz. web banner, distributors sending e-mailers to investors, publishing education advertisement in monthly magazine of distributors etc.”
The market regulator has clarified that such IAPs create awareness only among clients of distributors or RIAs instead of direct plan investors and new investors. SEBI said, “The cost incurred on IAP initiatives through distributors or investment advisors shall not be charged to IAP corpus i.e. 1 bps earmarked by the AMC.”
