A longstanding demand of SEBI Registered Investment Advisors to get feeds of direct plans has finally been met, though in a limited way. Cafemutual has learnt that about 10-11 AMCs are currently providing the feeds of direct plans to SEBI Registered Investment Advisors through iFAST platform.
DSP BlackRock and Mirae Asset Mutual Fund are among the AMCs which are providing feeds of direct plans to SEBI RIAs though iFAST platform. However, RIAs are demanding that all AMCs, especially the larger ones, should provide feeds of direct plans as it is in the interest of the client.
“Our clients are ready to give consent to AMCs to provide direct feeds but majority of the AMCs are reluctant to provide this data. As a result of this, SEBI RIAs will give business only to those AMCs who are providing feeds of direct plans. I think over a period of time all AMCs will start sharing this data,” says Suresh Sadagopan, a SEBI registered Investment Advisor from Mumbai.
“There is an agreement between the client, platform, RIA and the AMC. So direct feeds are provided to RIAs. This is done with a reverse feed mechanism. Through iFAST we know where the money is coming from which is not the case with individual RIAs,” said the sales head of a foreign fund house which is providing feeds of direct plans to SEBI RIAs.
Currently, the feeds of direct plans are provided by individual AMCs and not by R&Ts. “We will allow SEBI RIAs to get direct feeds if R&Ts agree to provide the data,” says C.R. Chandrasekar – Founder & Chief Executive Officer, FundsIndia.
Fund officials say that AMFI guidelines prevent them from sharing direct plan data with distributors. They say that if they provide feeds to distributors then they will have to capture the ARN of such distributors. If they capture ARNs in direct plans, AMCs have to prove that they haven’t given commissions to such distributors. “We appreciate that SEBI RIAs want to collect fee from advisors and recommend direct plans. AMCs can technically provide direct feeds to distributors. However, AMFI guidelines don’t permit AMCs to provide direct feeds,” said Aashish Somaiyaa, MD & CEO, Motilal Oswal Mutual Fund.
In its board meeting held on December 21, 2012, AMFI board observed that tagging ARN would be a compliance violation. “Tagging of ARN for a transaction may tantamount to investment routed through distributor. The board, therefore, decided that the tagging of ARN in respect of applications received under direct plan would be a compliance violation,” stated the circular issued by AMFI to AMCs.
AMFI board had turned down a request of distributors to allow tagging of ARN in direct applications. It may be recalled that with the introduction of the direct plan, the distributor has been cut out completely. It was argued that tagging would enable the advisor to get access to client records for the investments recommended by him/her so that they could monitor their client portfolios. In other words, distributors wanted their ARNs to be tagged in direct applications so that they could get the feeds of schemes they recommend to their clients.
Meanwhile, other AMCs are contemplating whether they should provide feeds of direct plans to RIAs.
