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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?
 

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COMMENTS

niraj

7 years ago

SEBI is a big bully. It demolished the upfront commission and reduced the trails. AFMI charges Rs.5000/- for new registration for ARN for 3 years. That is way steep. For ARN renewals it takes Rs.2500/-. AMFI just wants to make money by squezing IFAs. For becoming Life Insurance Advisor the fees are much less.
Organisations like NSE, NISM are just here to make money and very profitable. Why in financial services business every three years IFA need to renew the certification by paying fees? So that these people can make money. And the syllabus won't change every three years for mutual funds or equities.

REPLY

girish

In Reply to niraj 7 years ago

up to 10.06.2012 nism fees is 1500/- but from onward it will be 3500/-
reson they are hiring third party and period is for 2 days
making fool to distributer

PPM

7 years ago

Now, SEBI itself can be closed as they are not of use for a common investors - SEBI is there to support large corporates to make more money.

SEBI, always against IFAs and they will work against IFAs, as they want to show their power.

Nowadays. so many banks are selling MF units and how many of them have NISM certificates?

Ms. Chanda Kochchar should be removed from the Board of Governors of NISM as ICICI Bank is one of those banks selling MF units on a large scale and Ms. Chanda will definitely work against the IFAs so that banks can have a field day.

SRRao

7 years ago

so the distributors should expect no increase in their operating expenses ? IFAs are entrepreneurs and should know how to handle their revenues and expenses. Let us not look at everything with dark glasses - it would be good to review NISM for their deliverables and pull up them where required, instead of grudging a hike of Rs. 300 to be amortised by the IFAs over a long period !

girish prasad

7 years ago

still people some ifa in not understanding the case .this is a sieving . by reducing upfront some ifa is removed . then by bringing KYD some are again removed .by doing above some more will be seprated..days are not so long when for every form ifa have to pay process charge entry charge amc govering charge etc and that you have charge to customer .that will be crushing time .
seems friction today ? wait then

R balakrishnan

7 years ago

First, let SEBI prescribe an exam for those who manage the money. This is merely a money making racket for NISM. Anyone who passes the exam does not become knowledgeable merely because of this. A compulsory license for the bus conductor, but none for the driver! SEBI zindabad

REPLY

Jayant

In Reply to R balakrishnan 7 years ago

Yes Balakrishnan you've hit the nail absolutely on the head

Mukesh Kamble

7 years ago

What abt other un-secured bonds sold by unprofessionals. My friend has been selling Twinkle Company Bonds (Coupon 13.5%) for last so many years without any certification or qualification. Why is the honest always punished??

HEMA

7 years ago

IT IS MERELY TO PROMOTE CIEL. THEY ARE THE ONLY CPE PROVIDERS IN INDIA. THEY ARE THE ONE WHO WILL ENJOY......

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