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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