Brokers to sell MFs, but many are not qualified

Both the BSE and NSE recently announced their own MF trading platforms, immediately after SEBI gave its nod for introducing stock exchange based trading platforms for MFs (first reported by Moneylife). This has come as a delight to the broker community as they now stand to gain from another revenue stream.

Interestingly, however, many brokers do not even have the mandatory qualifications to be eligible to deal in MF products.

Moneylife had earlier pointed out that, for brokers, switching over to the complexities of MF schemes will involve a huge learning curve, given that their expertise lies in dealing with equity instruments. MFs represent a broadly different line of business altogether. This gap can only be bridged by passing the necessary Association of Mutual Funds in India (AMFI) test that would make them eligible to buy and sell MF units on behalf of clients.

Chandrashekhar Layane, senior vice president, FairWealth Securities said, “I think almost all the brokers would qualify to trade MF units on behalf of their clients; it is not that difficult to pass the AMFI distribution module. It depends ultimately on the broker’s business model. Apart from equity and commodity business, if he finds good opportunity in this platform, then he will surely get it done to qualify.” He recalled that in the past, brokers were hesitant to pass the NCFM exam introduced by NSE to run authorised trader terminals at their branches or franchisee locations. Now it has become a practice and almost all employees of the brokers are NCFM qualified.

The success of an MF trading platform would hinge on the ability of brokers to give quality advice to clients, tailored to their specific individual requirements. In such a scenario, brokers’ lack of expertise in MF products would only further alienate an already miniscule retail MF investor base. Mr Layane is of the opinion that absence of AMFI certification won’t hinder the implementation of MF platforms. “Many of the brokers who don’t have the AMFI distribution module certification will hire those candidates who have passed this exam to qualify to trade in MF units,” he added.

It is the responsibility of the Securities and Exchange Board of India (SEBI) to ensure that all terminal operators possess the necessary qualification before giving them the green signal.
 

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    COMMENTS

    Amitkumar Shah

    1 decade ago

    SEBI, IRDA is like a money Collection Center.. The CEO of MNC's company visit the SEBI and IRDA office, Approeved the Products and Launch in Market with Suppport of very high Coomission.. In such a scenario, brokers’ lack of expertise in MF or Insurance Products or any investment products. Many of the brokers who don’t have the AMFI or IRDA distribution module certification will hire those candidates who have passed this exam to qualify to trade in MF/ Insurance Products with the higher Commission,”

    R.Balakrishnan

    1 decade ago

    When the fund manager does not require any bloody license, does it really matter that the seller should pass some exam which is so silly that you have to get less than 50 percent to pass? Even today, the so called national distributor sends people who have no qualifications to sell mf's. So, let us drop this requirement.

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