Post March 2013, the source of application will be identified based
on investors PAN and area pin code
Mutual fund houses are witnessing instances of distributors in the top 15 cities diverting applications to below top 15 cities to earn higher commissions. Business generated beyond the top 15 cities is being given an average of additional 1% commissions compared to business from the top 15 cities.
Currently, fund houses are offering commissions based on the point of acceptance from where the applications are sourced. "Fund houses are currently cleaning up their database so that it is aligned with all the KYC Registration Agency (KRA). After March the sole determinant of your address will be PAN. So, tomorrow if a distributor routes a Mumbai application to Gwalior, it will be considered as Mumbai application," said an industry official on the condition of anonymity.
AMFI is believed to have communicated to AMCs and R&Ts that they have to move to a PAN and pin code based identification method post March 2013. Till then AMCs are closely monitoring their systems.
In order to increase the reach of mutual funds in hinterland, SEBI has allowed fund houses to charge an additional up to 30 basis points on daily net assets of the scheme if the new inflows from beyond top 15 cities are at least 30% of gross new inflows in the scheme or 15% of the average assets under management (year to date) of the scheme, whichever is higher.
"We have warned our distributors against this practice. SEBI's circular has to be followed in spirit. We have come across such cases in Gujarat," says a retail sales head of a top fund house.
Fund officials tell us that AMFI has defined the scope of top 15
cities with AMCs. For instance, Thane, Vashi and Kalyan, though suburbs, are
being considered as a part of Mumbai. Similarly, Secundarabad is considered a
part of Hyderabad and the entire NCR area will be covered under Delhi . So any
applications routed through Vashi, Gurgaon, or Secundarabad will not be
eligible for higher commissions.
