MF distributors yet to submit KYC documents to AMCs

AMCs are sitting on crores of rupees in the form of commissions due to inability of mutual fund distributors to submit KYC documents as per the SEBI mandate

Bank and national level mutual fund (MF) distributors are having a tough time complying with the Securities and Exchange Board of India (SEBI) mandate on know your customer (KYC) norms. This has led to a huge piling up of money with asset management companies (AMCs) that was supposed to be paid to these distributors.

Earlier in December 2009, market watchdog SEBI mandated all AMCs to obtain KYC documents from all distributors and hold the commission of distributors unless they submit the same.

“We did not pay the brokerage as per the SEBI circular. The data collation is taking some time. Some details are even as old as 12 years. And because of the huge time gap of about 12 years, the client may not be banking with the same bank any more,” said a official from a leading fund house.

Intermediaries are required to submit these documents physically to the respective AMCs. Due to the delay on the part of the distributors, AMCs are sitting on crores of commission which will be released only if the distributors comply with the SEBI circular.

“Distributors did not take it very seriously when the circular was out. National distributors are facing a lot of problems regarding this. I think it’s the right punishment for these distributors,” said an independent financial planner (IFA).

Apparently, many banks only have account numbers and names of the customers as part of the KYC norms. “It is really shocking that even multinational banks, which are regarded to be perfect in compliance norms and record keeping, are struggling to submit KYC documents to AMCs since the last three months,” said other IFA.

According to a distributor, banks never gave any KYC documents to AMCs. “They (the banks) just gave a certificate saying that they are holding KYC documents of all the customers and also issued a undertaking that they will present it (the documents) when required by law,” the IFA said.

Industry sources indicate that there can be a possibility of some AMCs favouring bank distributors by paying through the ‘reimbursement of expenses’ route, a kind of payment made in advance. “I think banks are getting the money through some or the other route,” says a source.

Indian Banks Association (IBA) officials were not immediately available for comments.

Besides the KYC documents, SEBI has also asked AMCs to obtain all supporting documents of the past transactions from the distributors.

Earlier, there were reports that the distributors are planning to approach SEBI to have a central bureau of registry for all KYC documentation to bring down the excessive paper work.

Distributors were also planning to lobby for a digital KYC until a proper system is put in place, but there doesn’t seem to be any headway made on this front so far. 

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    K c Sharma

    1 decade ago

    This is badmasi by mutual fund company my investors investment application is many times rejected because of non submission of kyc document of cdsl but here mutual fund companies are accepting investment application from bank distributors without kyc papers since last 12 years from bank distributor.
    this badmasi of mutual fund company and they must be prosecuted by sebi amfi and rbi.

    Natural gas prices of ONGC, OIL may go up by 30%

    The Tariff Commission has proposed that ONGC be paid Rs3,875 per thousand cubic metres for the gas it produces while Rs4,315 per thousand cubic metres would be paid to OIL. Consumer prices would be 10% higher than these figures

    The Indian government may soon raise prices of natural gas produced by state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) by as much as 30%, petroleum secretary S Sundareshan said on Monday, reports PTI.

    "I am told by the petroleum minister (Murli Deora) that the issue is in the final stages of decision-making in the government. We expect a decision soon," he told reporters on the sidelines of the 6th Asia Gas Partnership Summit at New Delhi.

    Price of gas produced by ONGC and OIL from fields given to them on nomination basis were last revised in 2005. Current rates of Rs3,200 per thousand cubic metres ($1.79 per metric million British thermal unit [mmBtu]) are less than half of the $4.2 per mmBtu price of gas from KG-D6 field of Reliance Industries.

    The oil ministry has circulated a Cabinet note for hiking price of gas under administered pricing mechanism (APM) to Rs4,142 per thousand cubic meters ($2.32 per mmBtu).

    The price of gas under APM is proposed to be raised in stages to Rs7,500 per thousand cubic metres or $4.2 per mmBtu by 2013.

    Mr Sundareshan said that the government was weighing policy options to end differential pricing of natural gas that ranges from under $1 per mmBtu (APM gas) to $5.73 per mmBtu (for gas produced by the BG Group-operated Panna/Mukta and Tapti fields).

    "Over the next few months, we will explore further how to make all parts of the country get gas at approximately the same price," Mr Sundareshan said, indicating that prices of gas from different sources may be pooled or averaged out to make it uniform for consumers.

    Under pooling of prices, producers will get the price as per the production-sharing contract between them and the government. But consumer prices will be uniform irrespective of the source of gas.

    Sources said the note on APM gas price increase was based on the recommendation of the Tariff Commission, which proposed that ONGC be paid Rs3,875 per thousand cubic metres for the gas it produces while Rs4,315 would be paid to OIL. Consumer price would be 10% higher than this.

    About 40% of the nation's 140 million standard cubic metres a day of gas output is sold at administered rate. A hike in rates of these is an attempt to reduce distortions in a market with more than a dozen prices.

    The government has set $4.2 per mmBtu as the sale price of gas from Reliance Industries' eastern offshore KG-D6 fields, while the gas from the BG Group-operated Panna/Mukta and Tapti fields is sold at $5.73 per mmBtu.

    State-run ONGC lost a whopping Rs4,745 crore in revenues on selling 17.71 billion cubic metres of natural gas at a rate below production cost in 2008-09.

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