Amfi Unit V Re-edited

A PRESENTATION ON AMFI

FUND DISTRIBUTION AND SALES PRACTICES CURRICULAM

Who can invest in mutual fund in india 1) Resident including • • • • • •

Resident Indian individual Indian companies Indian trust Financial institution Non banking financial institution Provident fund

2)Non Residents including • •

Non resident Indian Overseas corporate body

3) Foreign entities •

FII registered with SEBI

Types of distribution channel 1. Individual agents as distributors • • •

newly recruited individual distributors Existing individual distributors Employees of mutual fund

2. Distribution companies Sub brokers, banks.

3) Bank & NBFC (private, public, foreign)

4) Post offices 5) direct marketing Mutual sell their own product without use of any intermediatories.

Relevance of sales practices • Sales practices usually arise from convention but may also be mandated by regulators. • Sales practices cover such areas as distributor commission, before sales and after sales service from funds to investor etc.

Sales practices in Indian mutual fund market • Commission rates There are no rules prescribed for governing the minimum or maximum commission payable by a fund to its distributor. Commission rate for equity scheme range from 1.5% to 2.5%,For debt funds between 0.25% to 1.25%.

Contd… • SEBI regulation • All initial issue expenses including brokerage paid to distributor are limited to 6% of resources raised under the scheme. • In addition, SEBI regulated open-end funds are Authorized to charge the investors “entry & exit” load to cover the fund distribution expenses.

Contd... • Market practice Some funds pay the entire commission up-front to The distributor. (at the time of sale of units), while others pay a part of it up front & the balance in phases.

• Distributor's obligation Commission arrangement is between fund & distributor. the fund is not answerable for the activities of the sub-brokers.

Contd… • Investor servicing

define the role & responsibilities of its distributors. from an investors perspective the distributors services are limited to the sale of mutual fund units. Following practices for effective selling of mutual funds by distributors:• Distributors should be fully aware of the important characteristics of the schemes that they are selling. • Understand the each clients needs with respect to their investment objective, risk tolerance return expectation. • Distributor must seek from clients, the commitment to invest.

Sales Practices-Norms for Mutual Funds

• SEBI Advertising code

Measuring, evaluating fund performance. 1. The code protects investors from misleading advertising by Specifying norms for computing returns, management capability & comparisons that may be contained in advertisements. 2. The code classifies advertisement into two categories – one that contains basic in formation regarding an existing scheme Performance.

Contd… • Terms of appointment of Distributors The distributor will provide to the customer a copy of the key information memorandum & make available for inspection, a copy of the full offer document.

• AMFI code of Ethics • Management of the fund ought to be in the interest Of unit-holders. • High standards of service are expected from the funds. Adequate disclosure by the funds ought to be made to unit-holders & trustees.

PRESENTED BY Harpreet kaur Kuldeep Nitesh porwal Vishnu patel