SEBI slams AMFI for ignoring directive on trail commission

SEBI has again put its foot down on the trail commission issue. Will AMFI comply this time?

As the Association of Mutual Funds in India (AMFI) continues dilly-dallying for over six months on whether trail commission would continue to be paid to the old distributor even after a customer has walked away, the market regulator, Securities and Exchange Board of India (SEBI) has rapped AMFI on the knuckles asking it to implement a clear-cut decision taken more than two years ago.

On 30th December, SEBI slammed AMFI with a polite but firm email which says that AMFI must implement its own circular of 5 September 2007 along with the SEBI circular of 11th December. The December circular of SEBI clarified that distributors cannot insist on non-objection certificate (NOC) when a customer moves from one distributor to another. The SEBI email reads: “the non-insistence of NOC has to be implemented in conjunction with adhering to AMFI circular of September 2007 regarding payment of commissions. Please confirm that SEBI circular of December 11th and inter alia references to AMFI circular of Sep 20007 are fully complied with by all mutual funds.”

The 5 September 2007 AMFI circular had categorically said: “On receipt of letter from the investor advising AMCs about his desire to change his distributor, AMCs will act on the instruction. Once the distributor (ARN code) has been changed, the trail commission thereafter for all business done by the old distributor (under old ARN code) may be payable to new distributor (under new ARN code) on a prospective basis subject to terms and conditions, if any, entered into by AMCs with such distributor.”

This was a clear-cut decision and direction. Mysteriously, it never got implemented. Instead, AMFI put the matter to vote a few months ago—two years after having issued a clear-cut direction. In the process, 11 out of total 17 voted in favour of giving trail commission to the new distributor. However, AMFI did not implement this as well, which was first reported by Moneylife Digital (read it here).
 In a remarkable example of cussedness, AMFI then asked for votes by email, also first reported by Moneylife Digital (read it here).

 All chiefs of asset management companies got an email in the afternoon of 22nd December asking them to vote on three questions—whether the trail commission of a departing customer: a. should be paid to the old distributor; b. should be paid to the new distributor; c: should not be paid at all. Funds are supposed to vote a simple yes/no to each of these three questions.

It now appears that AMFI’s move on 22nd December came just a few hours after SEBI sent a mail to AMFI which read: “Please read the circular on the unambiguity on the payment of trail commission in case of change in distributor. However, we understand that there is lack of uniformity among AMCs in compliance with the said guidelines of AMFI. You are advised to revert to us with a confirmation on compliance with the said AMFI guidelines in the AMFI circular on September 5th 2007.”

In a remarkable example of cussedness, AMFI ignored SEBI’s clear directive and instead went in for an email vote. But eight days later, one day before the deadline of the email vote were to lapse, SEBI issued its missive to AMFI, asking it to implement the simple, logical decision taken in September 2007 that trail commssion has to go to the new distributor. The question is who benefited from the years of stalling and the cat-and-mouse game AMFI has been playing?

Comments
jigneshdesai
1 decade ago
So , now is it that all commission for investments done under the old Distributor goes to the new Distributor once the Investor changes his Distributor ?
saurav singla
1 decade ago
Pls go through the below mail so that you can have an idea since how long I am fed up with UTI AMC. Folio no 4019342202339. Kindly help me to reedem the same. My contact Details are as below +91-9872772239. SCO No 28, Sector 11 Panchkula.

When did you sent me the mail regarding the scanned image not clear.

Saurav Singla

-----Original Message-----
From: [email protected] [mailto:[email protected]]
Sent: Monday, April 26, 2010 2:53 PM
To: [email protected]
Subject: OHTER SERVICE REQUESTS

Ref: sun/EML/UTI/1185506/1128385 Dt.: 26/04/2010

Dear Sir/Madam,

Unit : UTI MUTUAL FUND
Folio : 4019342202339
Scheme :

This is with reference to your mail dated 16/04/2010 attached herewith. We regret the delay in our response. As per your previous e-mail, we have informed you that, the enclosed scanned image was not clear. We had requested you to provide us clear scanned image to check and assist you further.

For any further information on UTI Mutual Fund Schemes or Investment options, please visit our website http://www.utimf.com or feel free to write back to us at [email protected].

You can also reach us on UTI Toll free number 1800 22 1230 for further assistance.

Regards,
Sunil
Executive
Customer Support - NCT
UTI MFS
Karvy Computershare Pvt Ltd

arvind navare
1 decade ago
Trail commission to be given to new ditributor since many banks as a broker has mis-selled the products & charging service charges which IFA's are not charging.
chetan shah
1 decade ago
NONE
Kirit Nagda
1 decade ago
Good for Action from SEBI.
SEBI Bad for Sleeping for So many years.
More over Common Application Should be Introduced for Mutual funds.
Format of Transaction,STP, SIP, Fact Sheet Should be comman.

Acc statement Some fund House Have Redemption colume Back Side why? Reply. Soom have very Less Space to fill. Eg FT.

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