The industry body will tweak ARN registration and renewal norms from 1 September 2010
After announcing a sharp hike in AMFI Registration Number (ARN) renewal fees across the board in May this year, the Association of Mutual Funds in India is all set to tighten the noose on mutual fund distributors further. The existing guidelines for procuring an ARN number and renewing it will be made more stringent.
"We already have a process in place and we are tightening the same process a little bit," HN Sinor, chief executive officer, AMFI, told Moneylife. However, Mr Sinor declined to divulge any further details and said that the AMFI board has to approve the changes first. When asked if AMFI is considering reducing the fee structure, Mr Sinor said that it was not. The ARN renewal fee was hiked to keep serious players in the market in an attempt to curb mis-selling. Alarmed by the steep hike, some distributors - who were already hit by dwindling commissions - approached AMFI to consider relaxing the fee structure.
Earlier, individuals and corporate employees were required to shell out Rs250 as renewal fee which was increased to Rs2,500. For banks, non-banking financial companies (NBFCs), public limited companies and institutional distributors, the renewal fee was raised from Rs7,500 to Rs2,50,000.
Individuals who pass the AMFI examination are allotted an ARN number. From 1st June, The National Institute of Securities Markets (NISM) conducts the certification for distributors called CPE (Continuing Professional Education).
"Their (AMFI's) idea is to have a good quality distribution setup, but the problem is that there are too many things happening so quickly. In the last one year, they have implemented more changes than what has happened in the last 15 years. I was speaking to a senior official in Singapore who advises various regulators there. They have a well laid-out plan for any regulatory changes. It takes seven years to make the kind of changes which we have done here in (only) seven weeks. All good things will take shape if they are done in the right manner. You can't get up one morning and say I want everything cleaned up overnight. The direction is right but the execution is wrong," said a Mumbai-based certified financial planner (CFP), preferring anonymity.
Currently, individuals and corporate employees are required to furnish a copy of the AMFI certificate, two photographs and the fees at the time of registration. "The current procedure is very simple. They can bring some changes in mandatory requirement of certain documents which will be an ongoing process. This practice is followed worldwide. Globally, they follow far stricter guidelines but the industry is flourishing because the distributors are also making money. Their yield (commission) is around 3% there but in India the regulators have reduced it to around 1%," added the CFP.
Rajesh Krishnamoorthy, managing director of iFAST Financial told Moneylife, "Without specifics of what AMFI will do, it is difficult to frame any opinion.
AMFI will have to balance both the social norm and the business norm. The social norm being - more the number of people associated with the distribution of mutual funds, the better the chances of penetration and growth for the industry. The business norm on the other hand would be - the more the serious players in the distribution of mutual funds, the lesser are chances of investors being misled. So, I think, for AMFI, it is something like what the RBI (Reserve Bank of India) has to do - walk a tightrope - tame inflation (non-serious players), yet help economic (the mutual fund industry's) growth."
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