AMFI issues advisory for MF houses against linking distributor training programmes to achieve SIP targets

The Association of Mutual Funds in India (AMFI) has issued an advisory for mutual fund houses asking them to discontinue conducting training programmes for MF distributors in order to achieve sales targets on systematic investment plans (SIPs). 

In a circular issued on Thursday, AMFI said that many asset management companies (AMCs) have launched special SIP drives under regular plans for a specific period. Under these drives, distributors are offered training programmes at zonal or national locations, which depends on the number of SIPs or incremental value of SIPs mobilised from Top 30 (T30) or Beyond 30 (B30) locations with certain minimum target. 

AMFI CEO NS Venkatesh in the letter said there were concerns among the AMFI board members if the training programmes were in line with the Sebi regulations.  

The note added that AMFI then examined the matter and came to a conclusion that AMCs were advised against incentivising the MFDs by linking the training programmes to achieving SIP sales targets. 

"Further,  asset management companies (AMCs) who already have launched (or propose to launch) any special SIP drive under regular plan, wherein the MFDs are incentivised by way of training programs are requested to withdraw such incentive programs forthwith and send a confirmation to AMFI," the letter stated. 

Sebi norms for AMCs 

The letter stated as per Sebi norms: 

All expenses related to schemes, including the distributor's commission, by whatever name and whatever manner of payment, is to be paid from the scheme only within the regulatory limits and not from the AMC’s books, or its associate, trustee, sponsor or any other equity via any route. 

The training programmes that are held for distributors should not be misused to give any reward or incentive to the distributors. 

The AMCs should adopt a full trail model of commission for all schemes, sans payment of any upfront commission or trail commission, in cash or kind, via any route. 

"Upfronting of trail commission is allowed only in case of inflows through SIPs. In respect of inflows through SIPs, a carve out has been considered only for new investors to the mutual funds industry (to be identified based on PAN). The upfronting of trail commissions, based on SIP inflows shall be up to 1 percent payable yearly in advance, for a maximum period of three years," the letter stated. 

Earlier this month, AMFI said the mutual fund industry’s net asset under management (AUM) was Rs 39.42 lakh crore, while the average asset under management (AAUM) was Rs 40.04 lakh crore in March 2023. AMFI said mutual fund folios also reached an all-time high of more than 14.57 crore, and retail MF folios were also at a record high. 

It added that retail AUM (equity, hybrid, and solution-oriented schemes) stood at Rs 20.34 lakh crore in March 2023, with an average AUM of Rs 20,45,632 crore.  

In addition, the number of retail scheme folios was more than 11.64 crore, and the SIP contributions were Rs 14,276.06 crore. 

The number of SIP accounts stood at 6,35,99,116 in March compared to 6,28,26,035 in February. On the other hand, the SIP AUM was Rs 6,83,296.24 crore in February 2023, compared to Rs 6,74,414.92 crore a year before. 

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