REGISTRATION OF INTERMEDIARIES - SEBI - MFD/CIR/20/23230/2002

Circulars CHIEF GENERAL MANAGER MUTUAL FUNDS DEPARTMENT MFD/CIR/20/23230/2002 November 28, 2002 All Mutual Funds Registered with SEBI Unit Trust of India Association of Mutual Funds in India (AMFI) Dear Sirs, REGISTRATION OF INTERMEDIARIES As you are aware, SEBI circular No. MFD/CIR No.10/310/01 dated September 25, 2001 stipulates inter alia that all distributors and agents of mutual funds units should pass the AMFI certification examination and follow the provisions of SEBI (Mutual funds) Regulations and Guidelines including code of conduct. Further, SEBI Circular No. MFD/CIR/ 06/210/2002 dated June 26, 2002 inter-alia required them to also follow code of conduct as recommended by AMFI. It has since been decided in consultation with AMFI that all intermediaries engaged in selling and marketing of mutual funds units (distributors, agents, brokers, sub-brokers or called by any other name, whether individuals or of any other organisation structure) shall be registered with AMFI by March 31, 2003 Such registration shall be subject to passing of certification examination and adherence to guidelines as specified by SEBI and AMFI from time to time. Empanellment of Intermediaries by Mutual Funds The empanellment of intermediaries with mutual funds and payment of commissions, brokerage/sub-brokerage etc. shall be in accordance with parameters and guidelines specified by SEBI and AMFI from time to time. Mutual funds shall monitor the compliance of these guidelines and code of conduct by their intermediaries in terms of business done across all mutual funds. In case of non-compliance, the empanelling mutual funds may suspend further business and pay-out of commissions, etc. until full compliance by them. Exemption for Senior Citizens Senior citizens with experience in distributing mutual funds units may be allowed exemption from certification examination. Such intermediaries should have completed 60 years of age as on March 31, 2003 and should have two years of experience. They shall follow SEBI and AMFI Guidelines and shall be required to be registered with AMFI. They shall also attend a mutual fund training programme.within one year from March 31, 2003 and a certificate to that effect endorsed by a mutual fund should be submitted to AMFI. Code of Conduct The mutual funds should mobilise funds from the investors on the strength of professional fund management, lower expenses and good management practices and not on the basis of unhealthy inducements to intermediaries and investors. In this connection, your attention is drawn to clause 14 of the code of conduct issued vide SEBI Circular dated June 26, 2002, which prohibits sharing of commissions by the intermediaries with the investors and attracting clients through temptation of gifts etc. All mutual funds and intermediaries are advised to follow it strictly and should not indulge in any practice contravening it directly or indirectly i.e. paying commissions in any form or by allotting intermediary codes to investors or their associates for paying them commission on their own investments, etc. However, considering the representation from AMFI and intermediaries, commitments if any made to investors by way of incentives/rebate for the business done till June 26, 2002 (the date of issue of code of conduct by SEBI) may be honoured, as a one time measure, within 30 days from the date of issue of these guidelines. Reporting of Compliance The mutual funds shall report the compliance of above requirements in the periodical meetings of the Boards of AMCs and trustees and they shall report the compliance in their quarterly and half-yearly reports submitted to SEBI. This circular is issued under Regulation 77 of SEBI (Mutual Funds) Regulations, 1996. Yours faithfully, P.K. NAGPAL