Code of Conduct for Intermediaries of Mutual Funds
(as prescribed by AMFI and advised by SEBI vide its circular dated
26th June, 2002)
Take necessary steps to ensure that the clients’ interest is
protected.
Adhere to SEBI Mutual Fund Regulations and guidelines related to
selling, distribution and advertising practices. Be fully conversant
with the key provisions of the offer document as well as the
operational requirements of various schemes.
Provide full and latest information of schemes to investors in the
form of offer documents, performance reports, fact sheets, portfolio
disclosures and brochures, and recommend schemes appropriate for the
client’s situation and needs.
Highlight risk factors of each scheme, avoid misrepresentation and
exaggeration, and urge investors to go through offer documents/key
information memorandum before deciding to make investments.
Disclose all material information related to the schemes/plans
while canvassing for business.
Abstain from indicating or assuring returns in any type of scheme,
unless the offer document is explicit in this regard.
Maintain necessary infrastructure to support the AMCs in
maintaining high service standards to investors, and ensure that
critical operations such as forwarding forms and cheques to AMCs/registrars
and despatch of statement of account and redemption cheques to
investors are done within the time frame prescribed in the offer
document and SEBI Mutual Fund Regulations.
Avoid colluding with clients in faulty business practices such as
bouncing cheques, wrong claiming of dividend/redemption cheques, etc.
Avoid commission driven malpractices such as:
(a) recommending inappropriate products solely because the inter-mediary
is getting higher commissions there from.
(b) encouraging over transacting and churning of mutual fund
investments to earn higher commissions, even if they mean higher
transaction costs and tax for investors.
Avoid making negative statements about any AMC or scheme and
ensure that comparisons if any, are made with similar and comparable
products.
Ensure that all investor related statutory communications (such as
changes in fundamental attributes, exit/entry load, exit options, and
other material aspects) are sent to investors reliably and on time.
Maintain confidentiality of all investor deals and transactions.
When marketing various schemes, remember that a client’s interest
and suitability to their financial needs is paramount, and that extra
commission or incentive earned should never form the basis for
recommending a scheme to the client.
Intermediaries will not rebate commission back to investors and
avoid attracting clients through temptation of rebate/gifts etc.
A focus on financial planning and advisory services ensures
correct selling, and also reduces the trend towards investors asking
for pass back of commission.
All employees engaged in sales and marketing should obtain AMFI
certification. Employees in other functional areas should also be
encouraged to obtain the same certification.
