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In an FAQ on do’s and don’ts for MFDs, AMFI has asked MFDs to maintain a proper record of risk profiling of all their clients in physical or electronic form. Further, MFDs will periodically review risk profiling of clients and update it in their book of records.
Further, AMFI has clarified that MFDs can do goal-based investment for their clients. However, such incidental advice should be limited to investments in mutual funds.
Here are other key highlights of the FAQ that matters to you most:
- MFDs can provide incidental advice limited to mutual funds
- Incidental advice does not include providing financial planning
- MFDs cannot do financial planning or use such words
- However, MFDs can have advisory relationship with clients, which is limited to recommendation of mutual fund schemes
- If a client has execution only relationship i.e. only related to transaction in mutual funds, the MFD will have to send a written communication to investor about non-suitability of the scheme
- Such a communication has to be acknowledged by the investor
- MFDs can promote their business but can use materials approved by AMCs or available on AMFI website
- MFDs can have a YouTube channel but they cannot give any scheme specific recommendations or talk about performance of MF schemes
- MFDs cannot make commentary on past performances and future return prediction on their social media handles
- MFDs can offer multiple products and services and market it on their website
- MFDs need to keep record of product suitability and consent of investors if they offer execution only services
- MFDs should also maintain a complaint register physically or digitally
