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  • MF News AMCs to introduce approved methodology to arrive at MFDs commission: SEBI

    AMCs to introduce approved methodology to arrive at MFDs commission: SEBI

    Also, fund houses will have to conduct regular performance reviews of their distributors
    Nishant Patnaik Sep 28, 2021

    SEBI has revised existing risk management framework in which it has directed fund houses to introduce an approved methodology to determine commission structure of their distributors. The methodology could have a matrix model based on which fund houses can approve deviations, said SEBI.

    Another key development is clawback in commission. SEBI has made claw back provisions voluntary for AMCs.

    Here are other key elements of the new framework related to distribution business:

    Mandatory

    • AMCs have to ensure that they have the mechanism to evaluate instances of mis-selling, prepare inspection report, analyse portfolio of investors and so on. One way to see if mis-selling has happened is by looking at AUM of a scheme and check if growth is due to performance or higher commission paid to distributors, said SEBI
    • AMCs will be held responsible for mis-selling of their distributors
    • AMCs will have to do detailed analysis of mis-selling
    • MFDs should not mislead investors by representing any select time period to represent returns
    • Put in place a mechanism to audit commission paid to distributors
    • Ensure the commission paid to distributors is based on approved methodology and in adherence with AMFI norms
    • AMCs will have to conduct regular performance reviews of distributors
    • Conduct enhanced due diligence of distributors

    Voluntary

    • Monitor marketing, sales and promotion expenses of AMCs
    • Reporting on cost-benefit of outcome of marketing and promotional expenses
    • Undertake mystery shopping
    Have a query or a doubt?
    Need a clarification or more information on an issue?
    Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

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    34 Comments
    Santhosh · 2 years ago `
    First of all getting meagre amount of commission. For that also SEBI wants to enforce rules. Look at the Insurance industry, how IRDA LIC backing advisors.
    Prashant · 2 years ago
    So if they kill insurance advisor's commission then you will be ok? You are the biggest example of hum to dubenge saath mein sab ko le doobenge. You can't save your own income by fighting with these nonsensical and malicious regulations so you want others to drown with you. Find some guts. Unite with other fellow MFDs and fight. This jealousy which is actually unjustified will finish both insurance agenys and MFDs.

    Jaago distributors Jaago.
    Daxesh thaker · 2 years ago
    You are absolutely true. Why AMC would headache for all this nonsensical audit work. Would they not promote the direct scheme instead? Cafemutual must come forward and protect distributors interest
    Reply
    vinay · 2 years ago `
    All rules applied on MFDs only??

    What about Banks, NDs? biggest mis-sellers.
    What about online players? We have a recent example of what one online player did. But till date there is no action against them.

    In short these people wants small MFDs to get out of business and forcing them to be a sub-broker. They working to benefit NDs.

    Because they knows investors have more faith on MFDs then NDs.
    kalpana gupta · 2 years ago
    Totally Agree
    Deepak K Khurana · 2 years ago
    Agree
    Waryam Singh · 2 years ago
    Totally Agreed
    Venu · 2 years ago
    Yes.. 100% agree we have to represent to SEBI on ND and Bank miss selling issue..
    subhash · 2 years ago
    SEBI know everything,but they only want small distributers to left this bussiness.This is how our system work.Here online rummy is legal and playing card in individal is crime.Here Dream 11 is official sponser and small betting is crime
    Jay · 2 years ago
    True..
    Reply
    Chaitanya Badheka · 2 years ago `
    Nice one

    But at the same time SEBI have to think about Banks and other NBFC , who are the epicentre of the mis-selling the Mutual Fund , and insurance product. Investor have reduce faith on Mutual Funds because of Mis selling from the Bank. SEBI have to control over Banks and Other institute who are not able to know the requirement of investor’s need. Only sell those product which is called from higher authority
    Sumesh · 2 years ago
    Banks should not be distributing financial products
    Reply
    xyz · 2 years ago `
    HDFC AMC have launched so many NFO during the past 6 months and one would be amazed when the relationship manager themselves advocated that switch AUM yielding low brokerage to high yielding NFO. SEBI doesnt find any discrepancy.. Every fund house to be specific the bigger AMC, have adopted this strategy to mobilize funds. But sole blame for anomalies are MFD. Lets SEBI DECIDE that there is uniform brokerage across the industry..
    Krishna · 2 years ago `
    Very good move.. keep it up...
    suraj jatwani · 2 years ago `
    It's welcome step but Sebi should appoint an external auditor for amc audit and data publish on amc and amfi website too.

    In audit no role of amfi, amc and mfds.. Sebi directly appoints and take a report.

    Sebi have to investigate Banca, national distributor and tech app businesses commission audit
    suraj jatwani · 2 years ago `
    It's welcome step but Sebi should appoint an external auditor for amc audit and data publish on amc and amfi website too.

    In audit no role of amfi, amc and mfds.. Sebi directly appoints and take a report.

    Sebi have to investigate Banca, national distributor and tech app businesses commission audit
    SD · 2 years ago `
    One ND have their own AMC now. They are advising to switch Big AMC existing funds to their NFO. SEBI has no issue with that? Why? Is SEBI biased towards NDs/Banks ??
    ANANT V JAGTAP · 2 years ago `
    My 90% AUM -10-12-CRS. AUM switches from my ARN Code by A U Small Finance Bank, F. C. Road, Pune.. In this year. No AMFI OR SEBI asked question to Bank.
    Also A U Bank Manager.. Mehta & RM..
    Hemlata Auotade catching Senior Citizens in their Switiching "JAL" mostly in Pune City.. & especially Sakal Money Investers.
    .... Give Justice Small MFD's like me whose
    AUM Robery By Banks.
    Srini · 2 years ago `
    MFD's do they include all entities under this or only individuals. As Banks seems to be the major beneficiary and also most of the mis-sell happen here. If they do an audit of the recent NFO's and the % of allocation that the Banks have marketed you will see what amount of mis-sell has happened. But who is to bell the cat.
    prakash · 2 years ago `
    The first customer to amc was not defintly direct, it was through Distrubutor, now all the changes what took many year's in other countries the changes happening here in few year's
    Chandan · 2 years ago `
    Interesting. move from SEBI
    Positively welcome this. MFDs are getting unnecessaly worring here.
    AMCs need a self check first on mismanaged funds and fund mangers who are way below benchmark needs be checked .
    Bank clients are filled with group AMC funds. ICICI AMC has internal staff advocating direct funds, clients portfolio filled with ICICI funds. Recently a Bank aggestively took a target to sell a NFO of a group compnay AMC and grossly missold the NFO to make it a historical high. FM wants more such banks ! When fund mangers conduct meetings to distributors and advocate credit funds and the poor distributor goes ahead and belives the fund manager calls and proposes to clients, who is misselling? Who needs to be checked ?
    Perminder Dhillon · 2 years ago `
    SEBI has been a long term believer in selective hearing and selective targetting.Rule of the jungle - weakest gets killed the earliest.
    Raghuramam · 2 years ago `
    A request to mandate a simple uniform commission to all distributors for a given type of asset class is the easy thing to do. This was being asked for a long time. If the commission's are same, distribution will naturally choose the one that performs. Like wise, AMC also will be able to get investments only based on merit. Allowing AMC's to mis manage the commission, by giving them freedom to pay what ever they want to whome ever they want , and now asking them to monitor performance of distributors, looks like a misplaced judgement. Segregating commission as a specific uniform head in the expense ratio and making it a public , is the best option to stop misselling and churning.
    Surendra Kumar Bagaria · 2 years ago `
    Hope, the long awaited , some rationalisation in brokerage payment gets implemented
    K V Raghupathi · 2 years ago `
    PAN India runs with distributors in numbers of 1,10,000 effective who can promote and distribute mutual fund products. In fact, active partners are just 10% of enrolled distributors. AMFI want this number at least 5,00,000 to promote mutual funds. But, SEBI wants AMFI to screen distributors integrity and ethical values whether they are right in earning higher brokerages, by audit.

    Good sense should prevail upon the regulator and AMFI before put a blame on distributors. 70% of contribution to NFO which claimed as highest industry comes from the parent bank, that request their fixed depositor to pre close the term deposit without penalty and invest in that Equity fund NFO without explaining the risk element to the prospective investors. If this is not MI’s-selling, nothing should be called as Mis- selling. AMFI, you better get educated to understand what is MI’s-selling.

    SUSEELENDRA RAO KARNAM · 2 years ago
    Completely Agree.
    Bankers are cross selling - are they registered with AMFI? Bank gives incentives to them.
    Further, present brokerage to MFDs is too low. AMFI should take this very seriously and help the cause of MFDs.
    Reply
    Balasubramanyam · 2 years ago `
    Banks missell lot
    SEBI doesnt speak as govt representative are there
    From start sebi has been working against advisor

    Separate regulatory required if mutual fund industry has to to grow
    Sanjay jha · 2 years ago `
    MFD ARE VERY EASY TO FOLLOW ALL RULES BUT IN BANK NOW A DAYS SELLING INSURANCE AND SAYING FD. 50 PERCENT PEOPLE ARE COMPLAINS MISSLEADING BY BANK. SEBI. RBI ALL ARE LOOKING LIKE DHRITRASTA
    Suresh Bhura · 2 years ago
    It's not now a days, I have seen banks doing this since 2003, when i joined one of the biggest private banks, it's only that the incidence has increased.
    Reply
    Shyamal Kumar · 2 years ago `
    All rules applied on us (MFD) only??

    What about Banks? biggest mis-sellers.
    What about online players? But till date there is no action against them.

    Why bank sales mutual fund? God knows
    Sandeep Gandhi · 2 years ago `
    For SEBI, MFDs mean all types of distribution channels including NDs, Banks, fintech etc.
    I think it is a very good steps for most of the individual MFDs. Kudos to SEBI!!
    PRADIP KUMAR GHOSH · 2 years ago `
    SEBI should comprehensively investigate the open mis selling of MF products in the daylight by most of the banks including NBFCs by misguiding & giving wrong information & assurances of return to their customers. Most of the customers insist their confidence in the institutional commitments. So there must be a stricter regulations to stop such incidences.
    Daxesh thaker · 2 years ago `
    If the SEBI is so ethical, how can it allow icici bank or it's related concerne company to sell scheme of icici prudental mutual fund, similarly. HDFC, KOTAK, CANARA ROBECO, BANK OF INDIA, ETC..
    Chandra · 2 years ago `
    I think that banks main profile is to get revenue from deposits from customer and loan to customer. Major part of revenue should be from above task. However as per current situation, bank are not comfortable to earn revenue from above. Due to non recovery of huge loan from big corporate houses, regular default, NPA and insolvency of company or run away from India to other countries.
    Theier nain revenue cones from selling of mutual funds, insurances sectors, charges on minimum average balance andATM wirhdrawl charges. All banks are doing these activity with full force and considering this with main task. Also being esteemed and big organisation they are getting very high brokage due to heavy in buying power.
    Request to SEBI and AMFI and other regulatory authority to look and out strict check on these institution for level playing between MFD, s, small broker and big NBFC - Banks.
    Thanks and request to take above in positive to grow Mutual Fund industries.
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