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Unethical poaching games by fund distributors

Following the implementation of the new trail commission rules, some fund distributors are getting cleints to sign a changeover without their explicit consent

Following the Securities and Exchange Board of India (SEBI) direction to the Association of Mutual Funds in India (AMFI) to implement the new trail commission rules, a number of distributors are trying to snatch away clients from each other. However, this game is leaving the investor clients in a lurch.
According to an independent financial advisor (IFA), investors are lured into signing a form for changing their sub-broker under different pretexts.

“Following the core banking initiatives that require 11-digit account numbers, agents of a financial advisory firm asked investors to change their account numbers. They even offered to do it free of cost for the investors saying that unless they update their account number, their redemption amount or dividend may be transferred to someone else’s account. The investor clients are asked to sign a transaction form which prominently displays the bank account number but conceals the ‘change in sub-broker’ column that is placed at the bottom of the form,” the IFA revealed.

According to unconfirmed reports, UTI and DSP BlackRock carried out a check on the forms received by them pertaining to change of broker. When these two asset management companies called their investor clients, what they found out was shocking. Out of every 10 customers, six were not even aware of any mandate like this (the change of sub-broker).

This brings to light that most investors have not read the fine print before signing the dotted line and were literally duped into entering into a false contract. So be careful the next time, while signing any documents, especially one from a fund distributor or financial advisory firm.




7 years ago

Easy to blame everything on the brokers, IFA's & everyone else. But wasn't these issues bought up long time before the no entry rule coming in. still the regulator like some dumb JACKA** wanted to play the unfair game. I don't see how this rule has benefited the common man. More black money getting infused in the system. More of dirty tricks being played & even more useless gossip


7 years ago

In a country where mass 98% don't know what is mutual fund there every thing could be possible.
Now we are listening that mutual fund can be buy through stock exchange mechanism & a 350000 terminal will be very soon available to promote the mutual fund even in most remote part of our country.Alas again that cruel 98% figure flashing.Day or night whats the difference to
a blind person.Its not like a rice-wheat-sugar that price is cheap jump to buy,uff..again that 98% idiots of our society.To sum up who will enter in a broker terminal to buy mutual fund units in morning its guaranteed that in the evening that person will return home with pretty stocks in his portfolio & not mutual fund.Idiot 98%...& super idiot market regulator the worthless pan chewing sarkari babus...

R Balakrishnan

7 years ago

In many cases, IFA's are looking to sell out their existing AUM to big distributors. One of the large distribution houses, linked to an industrial house, has been'buying' clients of IFA's. Anyways, any distributor of financial products has no business to complain about 'ethics'


7 years ago

SEBI has given free hunting and killing ground of IFA's by big players like NJ,Prudent and offcourse banks-who use all tricks and technology to influence clients-but at a very high cost-and often misguiding clients-they put client in such a condition like GALE KA FANDA-rope tightend to neck-which client recognises later but cant get out-like switching of open ended schemes to tax savers-to earn more upfront and guaranteed trail of 3 yrs-this is all done by big players-bcos they want money at any cost-they dont bother to retain client-by proper advice-but still is sleeping SEBI over all ground facts-IT SEEMS IN A YEAR ALL IFA'S WILL BE VANISHED AND ONLY BIG PLAYERS WILL HANDLE WHOLE MF INDUSTRY LIKE PUPPETS IN HANDS OF THE KATHPUTLI MASTER.

Markets dangerously poised

Weak global cues weighed heavily on Indian markets

Indian markets slipped ahead of rate decisions from the European Central Bank and the Bank of England later in the day, and on the back of weak global cues. The Sensex closed at 16,225, down 271 points from the previous day’s close while the Nifty declined 87 points to close at 4,845. 

We had said yesterday that Indian markets will check their gains today and they did so. However, bourses are on an edge now. Check out 16,100 for support. If this level is breached, we may see a sharp downfall.

As per reports, the two top stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have decided to hold a special trading session on Saturday, 6 February 2010, as the NSE is testing an upgraded trading system. Trading will begin at 11:00 IST and end at 12:30 IST.

At 11:00 hrs IST the Sensex was trading at 16,378, down 118 points from the previous day’s close. However, at 13:00 hrs IST, the Sensex declined 107 points from the previous day’s close and was trading at 16,389.

At the end of the day, Housing Development Finance Corporation (HDFC) declined 3% after the RBI announced that it would disallow non-banking finance companies (NBFCs) and housing finance companies (HFCs) from resorting to short-term foreign currency borrowings.

The RBI cited prevailing macroeconomic conditions and improvements in domestic credit and liquidity conditions for this move. This is seen as part of the central bank’s efforts to gradually reverse its soft money policy.

Wipro Consumer Care and Lighting, the FMCG arm of Wipro, is reportedly in advanced talks to buy Nigeria-based skincare company Tura International. The stock was down 3%.

Telecom stocks declined on reports that the auction for the much-awaited 3G mobile phone services may not be held by 31 March 2010. Bharti Airtel fell 2% while Reliance Communications declined 4%.

Oil & Natural Gas Corporation rose 1% after a report from an expert group headed by Kirit Parikh on Tuesday suggested freeing petrol and diesel prices as well as raising LPG rates by Rs100 a cylinder and kerosene prices by Rs6 per litre. The Parikh committee’s suggestions, submitted to petroleum minister Murli Deora, would see a hike of Rs3 per litre in petrol and Rs3-Rs4 per litre hike in diesel, if implemented. GAIL India was up 3%.

Aurobindo Pharma has received the final approval for Cetirizine Hydrochloride Solution (1 mg/ml) from the US Food & Drug Administration (FDA). The stock was up 2%.

During trading hours, government data released showed that food inflation rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week following rising prices of potato and pulses. The inflation for primary articles, which includes food and non-food items, marginally eased to 14.56% in the reporting week from 14.66% in the previous week. The fuel price index rose 5.88%.

During the day, Asia’s key benchmark indices in Taiwan, Hong Kong, Japan, China and Singapore were down by between 0.08%-1.84% while South Korea’s index rose 0.09%.

As per reports, Australia’s Bureau of Statistics said that retail sales in December 2009 sank 0.7% from November 2009. This was lower than median forecast of economists of a 0.2% gain.

On Wednesday, 3 February 2010, the Dow Jones Industrial Average and the S&P 500 fell 26 points and 6 points respectively on reports that the US president pledged to complete banking and healthcare reform while the Nasdaq Composite index rose 1 point.

As per US reports, the ISM Non-Manufacturing Index rose to 50.5 in January from 49.8 in December, but fell short of economists’ expectations of 51. On the jobs front, ADP reported that 22,000 jobs were lost from private payrolls in January.

However in premarket trading, the Dow was trading 53 points down.



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