Fund houses will try to put in place
systems to institutionalize the process; compliance cost for AMCs is likely to
escalate.
Mumbai: Fund
houses are mulling over the ways to operationalise the new rules issued by SEBI
on Monday. The exhaustive due diligence process which will be carried out by
AMCs is likely to escalate the cost of compliance.
Some fund
officials say that the distributor regulation process is onerous and there is
no clarity on how the fund houses will be responsible for any misselling on the
part of distributors. The industry is waiting to get some more clarity on
operational guidelines from AMFI.
“We have to
establish a common process at AMFI level to authenticate the data provided by
distributors. We have to build systems. The cost of compliance will move up,”
says Himanshu Vyapak, Vice President, Reliance Mutual Fund.
AMCs say that
they do not have controlling authority over distributors. “SEBI should bring
distributor regulation first so that distributors know that there is someone
overseeing them. It is very difficult to deal with these formalities because
distributors are not our direct selling agents or in house employees. They sell
products of different AMCs. It is not clear whether fund houses will be liable
if there is any misselling on the part of distributors,” says a senior official
of a top AMC.
The industry is
confident of support from distributors. “All distributors have to cooperate
because it is a regulation. We have to institutionalize the process so that it
is standard in terms of disclosure and documentation,” said Srinivas Jain, CMO,
SBI MF.
Meanwhile, AMFI
is studying the guidelines carefully on the way to chart out a plan ahead.
“Some of these due diligence process are modeled on the Financial Advisory Act (FAA) of Singapore. Clients are anyway giving an acknowledgement through the application forms that they understand the risks associated with the scheme. The guidelines have to be fine tuned further,” said a Mumbai based advisor who meets the criteria of a big distributor as given in the SEBI circular.
