MF News MFDs need to tell clients: ‘Regular plans involve payment of commission to MFDs’

MFDs need to tell clients: ‘Regular plans involve payment of commission to MFDs’

Distributors facilitating online transaction will have to explicitly mention that regular plans which they recommend comprise payment of commission to MFDs.

Nishant Patnaik Apr 13, 2022

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Next time when your clients execute transaction on mutual funds recommended by you on digital platforms, they can read a message that ‘Regular plans involves payments of commission to MFDs’.

AMFI has revised the code of conduct for mutual fund distributors in which it has asked MFDs offering online transactions to explicitly tell their clients that regular plans pay commission to MFDs.

Further, AMFI has also asked MFDs facilitating digital transactions to prominently display their commission structure from different competing schemes across fund houses through a hyperlink.

AMFI said, “According to SEBI, MFDs cannot deal in direct plans. MFDs shall ensure that on any digital platform provided by MFD for offering investment facility to investor, it is categorically disclosed that the scheme the investor is subscribing to is of ‘Regular Plan’ which involves payment of commission to MFD. The link for the rate of commission received or receivable by the MFD for the different competing schemes of various Mutual Funds shall be prominently displayed on the platform indicating the same as a hyperlink. Further, a link to the AMFI Code of Conduct for Mutual Fund Distributors scheme offer documents (SID/SAI/KIM) shall also be prominently displayed on the concerned page.”

In addition, AMFI has asked MFDs using digital platforms to onboard, facilitate transaction and provide services to put in place cyber security measures to maintain confidentiality of digital data.

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48 Comments

Dinesh Singh Kushwaha · 2 years ago `

Nice efforts by SEBI to educate the investors but it is slightly biased. SEBI should educate investors about the services offered by MFDs like change of nomination, guidance, tax planning, KYC registration and modification, change in bank details and contact details, transmission of investment after the death of investor etc.
As a MFD, in just 2 years I have helped my clients in recovering lakhs of forgotten investment they have invested some 10-20 years ago and were not traceable to them because of non-updation of contact details and PAN, some of the AMCs/schemes were merged with others.
I always insist my clients to invest in either or survivor mode of operation rather than single mode of operation and register multiple nominees with guardian details. I ask them how to maintain record of investment in their investment register and whom to contact if I am dead. ????

SEBI should teach them that hiring a car with driver is much cheaper and comfortable than purchasing and driving a car by themselves. Instead of continously screwing MFDs they should ban selling of Mutual Funds by banks and so called free Mutual Funds investment apps. They should teach them that there's nothing free and they might be paying by their financial data to these so called free apps.

Aditya · 2 years ago

Loved it!!!

Deepak K Khurana · 2 years ago

True

andrew · 2 years ago

I agree with you. During last one year at least 15 direct investors contacted me for helping them to get their data in order, to help them to update bank details of merged banks and also for transmission of units when unit holder died and also for capital gain details. There is no option for us to help them as MFD we cannot charge them for the service. Furthermore investors receive commission details in their statement with 18% GST. Authorities also should note that how MFDs contribute to the government by paying 18% GST.

Nikhil · 2 years ago

Even more 35 to 40% n more foreign tour etc. Almost some companies given beyond 75% on Race of competition Insurance co. Promoted.. Why why there's no such regulations. And we as MFD only earn max in paisa.. And given lots of services to clients we did all clients services with bottom of our hearts due to clients like our family members.. We hv also family & as MFD our family depend on us.. JIO AUR JINE DO????

Mahendrakumar Thapa · 2 years ago `

MFD ke liye, aur kuch bhi baki hai...!!
Here, I urges to explain the sheet of making the " Loss of Direct Plan" and sharing to everywhere.. !!
Awareness, if positive side then, why we couldn't be explain the other side..!!
Let's, aware before we will be late.

Gaurav Singhvi · 2 years ago `

Why all these implications doesn't apply when Stock Broker or Bank Sold. It doesn't apply in Insurance too where commission is 25 - 35%

Vishal Rastogi · 2 years ago `

Transparency is always good but to what extend, the limits should be drawn out. Does anyone knows that how much commission is paid to Maruti, Tata Motors, Pantaloons, Reliance Trends, n so on when they sell any products .......? Why only MFD's are on target, why not ND's Banks, & newly online attractors (even few registrar offices) where they never or hardly follow any compliance or risk profiling process on sales of MF (many Banks sells it with saying it as FD's to the innocent customer), where miss-selling is high on graph, non-advisory mess in selection is high, where as most of MFD's build up their goodwill on their service approach, proper guidance, & fulfilling after sales requirements too. Educating the investors is must but count all the parts not only the commissions. ( we have not seen any adds of MF Sahi hai saying why MFD's are paid commission) ....... plz. be fare in all respect.

Deepak K Khurana · 2 years ago

True

FBN · 2 years ago

Thank SEBI for conitinuesly taking discouraging moves for MFD Community.
We are seeing more investments and success in Mutual Fund Industry ONLY because of MFD Community.
And now after having it well developed, MFDs are being targeted with various such policy decisions.
AMCs are supporting these policies by SEBI?
Which entity from Mutual Fund Industry will get more benefits out of this? Investors, Fintech Platforms or AMCs?

Pankaj Pancharia · 2 years ago `

Dear MFD Brothers

There problem is not with SEBI only but the bias of AMFI is under question mark. Notice a few points

1) The difference between Direct and Regular plan is almost 1-1.5% but the distributor as a whole never receive the complete difference of plan. Its not truly presented to AMFI

2) why dont AMFI flot a consulation paper for stake holder because there is no unity among MFD

3) There are a few bodies of MFD but they rarely fight for MFD even those they have fought on a few instances but objectives were hardly achieved

4) In a democratic country there are many ways to protest but our bodies choose talkative ways
Only.

5) Why the large MFD never come out and oppose these radical moves, because there is monetory benefit, because all AMCs pay big commission to them so they never bother of this

6) one more thing, difference between Direct or regular commission , has same been distributed to MFD ..Normally its not, AMC does make money out of this..There should be CAG audit under supervision of Ministry of finance ..and keep SEBI and AMC should out of that

My dear MFD friends there are a lot things to be written, but we all should wake up and fight for our rights before its too late.

Keshav Jain · 2 years ago

U say right Brother........

Dinesh Singh Kushwaha · 2 years ago

I agree with you that the commission an MFD receive is not the exact difference between the expense ratios of Regular and Direct plans. Reason are many, some of them are as follows:

1. The AMC doesn't pay equal commission to all MFDs, one one of the reasons is totally unjustified is that they pay according to MFDs AUM. Means NDs and banks gets more than the difference of expense ratio between regular and direct plans, whereas a newer MFD gets too less. Some AMCs have a policy and they pay only when the commission is over a threshold value.

2. AMCs run so called SIP drive or investment drive for the MFDs and pay higher commission for 5 years (or for life, in some cases) on SIPs started during that drive.

In my opinion all these practices by AMCs should have been banned instead of screwing the MFDs.

Sanjeev C. Bhatkar · 2 years ago

Dear Pankaj Pancharia, you have addressed this issue appropriatly covering almost all aspects adequately. I totally agree with uour views.

Saraban KARMAKAR · 2 years ago `

I think SEBI and AMFI wants to get voluntary effort from MFD for mutual fund marketing.There is so many money laundering & corruption happens in our country.But government didn't focus on it strictly. MFD are only weak people where government can do anything regarding there less payout. Because they haven't any political background and they did not engage any union like BJP, congress, AAP, SUCI, TRINAMOOL etc. So it is the most easyest way to implement anything as there choice on them who don't have any protesters. I think AMFI /SEBI need to be verify once before implementing the rules. Is that very very urgent to give this declaration where, the investor already know this thing. Because if the customer doesn't know about the. brokerages they don't involve direct equity trading via broking house by paying brokerage. So it will be a bogus implementation in mutual fund industry.

SAGAR DAXINI · 2 years ago `

IF SEBI AND AMC ARE SO MUCH CONCERNED ABOUT INVESTORS, SHUT ALL MFD'S LISENCE AND JUST KEEP DIRECT PLAN ONLY, WHY THE HELL THEY NEED MFD'S. REMEMBER ONE THING ITS ONLY MFD'S WHO HAVE MADE MUTUAL FUND'S POPULAR NOT THE DIRECT CHANNEL. WITHOUT MFD'S IT WAS TRIED FROM 2009 TO 2013 AND IT WAS A DISASTER.
DON'T KEEP MFD'S IMAGE LIKE THE ROBBERS, MFD'S FIVE ADVISE DO THEIR WORK AMD GET BROKERAGE WHICH IS LESS THEN ALL ITHER FINANCIAL PRODUCTS LIKE LIC AND ALL.

Sanjeev C. Bhatkar · 2 years ago

Very true, I agree with your view.

dvlsv prasad · 2 years ago `

it is true i agree my fellow distributors views

Jaideep · 2 years ago `

To me, it looks like SEBI cannot do anything about major problems like illiquid trading in debentures in the retail market, or the huge number of companies that get suspended deliberately by not complying with listing norms. That's why SEBI loves to waste time micro managing the mutual fund market.

Rajnikant · 2 years ago `

Who is AMFI to regulate?
AMFI is a cartel of manufacturers & not distributors. A manufacturer has no right on what a distributor discloses on his/her website.

It’s high time SEBI & CCI (competition commission of India) penalizes AMFI for cartelisation.

Jekin · 2 years ago `

While the industry body is so much behind MFDs to declare their commission, I really wonder why is this not the case with Insurance selling wherein the commission rates are as high as 15-20% (or even more) on first installment payment.

Nikhil · 2 years ago

Even more 35 to 40% n more foreign tour etc. Almost some companies given beyond 75% on Race of competition Insurance co. Promoted.. Why why there's no such regulations. And we as MFD only earn max in paisa.. And given lots of services to clients we did all clients services with bottom of our hearts due to clients like our family members. Stop amfi such too much transparency.. We have also family we have also looking forword MFD as a career. Requesting AMFI pls ????Jio air jine do

VMV Capital · 2 years ago `

Difference between Direct and Regular should be quantified. If the expenses for Management Fee etc. is same for both, then the difference should be equal to the extent of brokerage only. It seems AMFI and AMC together is manipulating the things. Prevailing difference in TER for Direct and Regular is unjustified. I also strongly feel that there should be CAG audit under supervision of Ministry of finance.

Rana · 2 years ago `

I think SEBI should also disclose how much the amc is making and how much is the remuneration of the fund manager managing that particular scheme...these guidelines are both frustrating and hilarious...I've not seen an insurance agent disclose how much commision he gets ...or a policybazaar disclose their payout structure on their website... infringement on basic rights of MFDs...who the hell discloses on this planet what they are earning individually

ashok kumar sahewal · 2 years ago `

It is strange how regulator are getting double standard . On one side they r encouraging investor that mutual fund sahi hai and on other side they are discouraging MFD to leave this business.

Nikhil Hasmukh Mehta · 2 years ago `

It is like telling any Business to tell it's customers that we are into the business for getting some income out of our expertise in the Business and not for Charity or just to pass our time as we have no other work.
I feel that SEBI is underestimating the Investors and thinks that they don't have common sense. SEBI thinks that Investors don't know that MF distributor is providing the services and earning anything out of it.

Anybody and everybody providing services is doing it for his earnings. What is new for the investors if they are told that I will be earning something when you are obtaining my services ? Are they not having their own common sense.

If SEBI & AMFI are so much concerned about Investors - what are they doing when big scams and frauds take place and investors loose their lifetime earnings.

And what a great amount or % of commission is given to MFD which they want us to tell. I think the Investors themselves will feel pity about what kind distribution services we are into.

Mohit Tolani · 2 years ago `

This is worse. SEBI & AMFI could do for us

Vinod poptani · 2 years ago `

As per my thoughts MFD should reward more, let see...
Does direct investors are able to built portfolio(as per risk tolerance) does they review portfolio periodically, does they able to Rebalance their portfolio
All these services are not free, i seen somewhere if MFD do it properly than investor can create 1.5% more wealth
They should paid from adequately both sides

Prashant · 2 years ago `

Jaago Distributor jaago is my slogan.

Governments and regulator and MF lobby(Cartel)'s slogan is Bhago distributors Bhago.

Now it is upto us whether we want to unite and Jaago or stay divided and Bhago.

We want to succumb to these corporates or we want to take charge of our business and livelihood and stand up to fight.

Neeraj Ramani · 2 years ago `

???? ????? mfd ?? ??? ??? ?? ????, ???? ????? ?? ???? ???????? ??? ????? ?? ??? ??,
??? ?? ?? ??? ????? ????? ??? ???? ?? ?? ??? ??? ?? ?? ????? ?? ?? ?? ???????? ??? ?????????????? ?????? , ???? ?? ??? ?? ?????? ??? ?? ?????, ???? ???? ?? ???? ???????? ?????? ??? ?? ???? ?? ?? ?????,
?? ??? ?? ?????? ??? ????? ???????? ??? ?????????????? ?? ????? ????? ???? ?? ????? ???? ?? ????? ???? ??? ?? ???? ????? ???? ????? ?? ??? ???? ?? , ????? ?? ????? ???? ?? ?????????????? ?? ???? ?? ??? ???? ?? , ???? ????? ????? ???? ??? ??? ??? ???? ?? ??? ?????? ???? ???? ?? ???? ???????? ???? ???, ?? ?? ????? ???? ,

Neeraj Ramani · 2 years ago

Does this platform is only for English , I jus expressed my views in My National language that is Hindi

Manish Mittal · 2 years ago `

This thing I m telling my clients always. I used to tell that client will get 2 mails in a year, in which our comission is disclosed and how much i will earn from you in the past 6 months. Clients will get mail in April n October of every month.
Sebi must do something for the distributors too.
#Bias Sebi

RAJESH BARDRINARAYANJI SHARMA · 2 years ago `

I have no issue with the decision if it apply to all stakeholders who sell mutual fund to any platform ...

Whether it is NJ, nd, banks , etc ...

Why MFDs then all should come under this decision ...

There should be uniformity in decision ... Its is not reservation ...
We are dealing in business and services ...

RAJESH BARDRINARAYANJI SHARMA · 2 years ago `

Sunil Meher · 2 years ago `

This is totally unfair..why only commission....make a rule of showing our biodata, 10th certificates, 12th certificates so that it would be more transparent...investors should know with whom they are investing...so that they won't fall pray in to hands of some duffer bankers who dont even know what mutual funds is yet they sell the product..& later when it comes to service part...the common ans from a banker is link not available sir..we ll connect u later...why not AMFI/SEBI talk about so called free app...why not they question about their revenue generation..where do they get money to run so called Direct plan ...the advertisement cost ..how the infos of the clients are utilised..get transparent in evey aspect..

Anand Jain · 2 years ago `

If AMFI does not want MFDs why dont shut the Distribution channel and sell only Direct plans there will be no need for making any code of conduct for MFDs do AMFI know how much efforts we MFDs take to acquire new investors and start SIP for them AMFI officials sitting in AC offices and issuing circulars every now & then only for MFDs then Why you keep sessions for MFDs to sell your NFOs & other schemes there you praise the MFDs for their efforts and from back door issue the circulars if you are not loyal with MFDs will you be loyal with the investors by doing all this SEBI and AMFI demoralising MFDs and also keeping away the new entrants in the industry.

MANOJ KUMAR · 2 years ago `

MFD are Backbone of MUTUAL FUND Industry.

Anil Nalawade · 2 years ago

In this message for client they also mentioned that Amc also taken fees .

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