Revised mutual funds requirements will hurt independent distributors, enrich NISM
Independent mutual fund agents and distributors will now have to shell out more than double the amount in order to continue doing their business. Is NISM looking to needlessly increase cost of doing business for its own benefit?
Small mutual fund (MF) distributors and agents who rely on their certificates for doing business, will now have to shell out more than double the amount in order to keep the certificate, as the National Institute of Securities Market (NISM), and the Securities Exchange Board of India (SEBI) are making life tough for them. It costs, at the most, Rs3,600 for adhering to the new mutual fund requirement norms stipulated by NISM at a time when the business is dwindling. This move also enriches NSIM which has little or no contribution to spreading genuine financial literacy.
According to the communiqué issued by NISM around two months ago, the candidate can opt to get the certificate in one Rs1,800 per day per candidate, in case candidate opts for a single day training (i.e. the candidate chooses to complete the continuing professional education—CPE—for only one day at a time out of the two days of the CPE programme); or Rs1,700 per day per candidate in case candidate opts to complete both days training on two consecutive days of the two days of the CPE programme. A candidate with a valid NISM/ AMFI certificate is required to complete the mandated two-day NISM CPE programme within a period of 12 months preceding the date of the expiry of the said certificate.
This means, for a two-day course, the maximum the candidate will now have to pay is Rs3,600 (Rs1,800 x 2 days; two non-consecutive days) or Rs3,400 (Rs1,700 x 2; two consecutive days). Earlier it was Rs1,500 for just a one-day programme.
“NISM has unnecessarily hiked prices at their own convenience, for unknown reasons”, complain distributors. Because this is a regulatory requirement, advisors and certificate-holders don’t have any other choice but to shell out more. SEBI already squeezed them out with the banning of entry loads. Asset Management Companies (AMCs) usually reimburse the fees to their employees who take the exam.
Further, the communiqué said, upon expiry of the validity of the certificate possessed by an associated person, the certificate may get revalidated, provided the associated person successfully completes a programme of CPE, as specified by NISM during 12 months preceding the date of expiry of the certificate, or by passing the relevant NISM certification examination before the expiry of the existing certificate.
The funny thing is that one could fork over far less money for a fresh exam than attend two days of ‘training’. The NISM-Series-V-A: Mutual Fund Distributors Certification Examination, which is the main certification exam, costs just Rs1,000 NISM more, theoretically, the candidate can flunk the exam twice and still save money if the examination route is opted (Rs400 saved—assuming two flunks and a pass on third attempt). Also, previously, the candidate had to renew the certificate within six months from expiry. Now that has been elongated to 12 months from expiry.
To provide a smooth transition, NISM will continue to offer the current CPE programme (the one-day programme) till 31 May 2012. An associated person holding a certificate whose validity will lapse on or before 30 November 2012 may undergo the current programme till 31 May 2012. Such a person holding a valid certificate whose validity will lapse between 1 June 2012 and 30 November 2012, and who has not undergone the above programme, may attend the NISM Mutual Fund Distributor (MFD) CPE as per the revised requirements from 1 June 2012 onwards, within the validity period of the said certificate. An associated person holding a certificate whose validity will expire on or after 1 December 2012 must undergo the NISM MFD CPE as per the revised requirements from 1 June 2012 onwards.
NISM performs two functions delegated to it under the SEBI (Certification of Associated Persons in the Securities Markets) (SEBI CAPSM) Regulations, 2007. These are:
1) Offering mandatory certification examinations for associated persons of securities market intermediaries. (i.e. NISM-Series-V-A: Mutual Fund Distributors Certification Examination)
2) Offering CPE programmes for associated persons of market intermediaries who are holding valid certificates. (i.e. NISM MFD CPE)
As per SEBI Notification Cir/IMD/DF/5/2010, since 1 June 2010, NISM MFD CPE programme has replaced the AMFI Refresher Course programme for the purpose of revalidation of NISM/ AMFI certificates.
Advisors are required to hold a NISM-MFD certificate in order to distribute mutual fund products and keep renewing them when they’re about to expire. NISM is a public trust, established by SEBI, the regulator for securities markets in India. According to the website, the board of governors of NISM include:
UK Sinha, chairman, SEBI (chairman, board of governors)
Prashant Saran, whole-time member of SEBI
PK Nagpal, executive director of SEBI
Uday Kotak, vice-chairman & managing director of Kotak Mahindra Bank
Chanda Kochhar, managing director & chief executive officer of ICICI Bank
RM Malla, chairman & managing director of IDBI Bank
Dr Anil Khandelwal, former chairman of Bank of Baroda
MS Sahoo, Advocate.
This isn’t the first time this kind of thing happened. Even AMFI had done it before, when it was in charge of issuing similar certificates, especially when they were losing ground to NISM (Mutual fund industry dealt another blow, AMFI hikes ARN fees). Is NISM looking to needlessly increase cost of doing business for its own benefit?