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SEBI has directed AMFI to ask AMCs not to offer any reward to their mutual fund distributors for achieving business or sales target.
In a letter to AMCs, AMFI said, “SEBI has brought to our notice that once again there seem to be promotions and contests being run by certain AMCs, where MFDs are being offered incentives or reward trips on achievement of certain business volumes beyond the commission payable.”
AMFI has asked fund houses not to misuse their training money to incentivize distributors with rewards and junkets.
In fact, AMFI has asked fund houses to send a confirmation to the trade body that they have withdrawn all such reward programs from regular plans. It said, “AMCs who already have launched or propose to launch any such incentive drive under regular plan, wherein the MFDs are being incentivized by way of reward trips are advised to withdraw such incentive programs forthwith and send a confirmation to AMFI.”
Earlier in April 2023, AMFI has asked fund houses not to use training money to run a sales contest like SIP drive or SIP trainings.
Currently, AMCs are not allowed to pay any reward other than commission to their distributors. Also, such a commission has to be paid from scheme i.e. within the distributable TER and not AMC.
While upfronting of trail commission is allowed in SIP inflows, it cannot exceed 1% yearly that too on assets from new investors.
