Being associated with 43 mutual fund houses is not possible any more for big distributors
The big distributors are unhappy with SEBI’s decision of not allowing external agencies to audit big distributors and IFAs. Most of them are reluctant to subject themselves to the due diligence process with multiple AMCs and are looking to trim the number of AMCs to do business with.
“It would be a tiresome process to allow individual AMCs to conduct its audit process one by one. This will lead to a lot of wastage of time from both the sides; therefore we would now select the AMCs that we want to be associated with. We are ready to share our records but if it was done in a much simple format it would have been better for all of us,” said Sadashiv Phene, an independent IFA.
AMCs also feel that this process will cause a lot of problem to both the parties. “Our auditors are already too loaded with work and on top of it they have to perform this additional work. We are trying to figure out a simple form to conduct this process,” said an official from DSP Blackrock.
The industry is still trying to streamline a process that deals with the regulatory requirements. “We are all waiting for a detailed format to be prescribed by SEBI or AMCs on how to maintain our books so that we start adapting the new process or else it will lead to a lot of confusion. But we all are going to cut short our fund list because it is going to be a tedious process to share data with 43 fund houses,” said Mukesh Dedhia, director, Ghalla Bhansali group of Companies.
This poses a challenge to small AMCs as big distributors may stop selling their products. Although small AMCs do not have too many big distributors in their list but it would affect their volumes that these big distributors brought. “This move of Sebi will force AMCs to put additional responsibility on distributors. The new rule will affect small AMCs but not many of them are associated with small AMCs,” says Suresh Sadagopan of Ladder7 Financial Advisories.
