Unethical poaching games by fund distributors

Following the implementation of the new trail commission rules, some fund distributors are getting cleints to sign a changeover without their explicit consent

Following the Securities and Exchange Board of India (SEBI) direction to the Association of Mutual Funds in India (AMFI) to implement the new trail commission rules, a number of distributors are trying to snatch away clients from each other. However, this game is leaving the investor clients in a lurch.
According to an independent financial advisor (IFA), investors are lured into signing a form for changing their sub-broker under different pretexts.

“Following the core banking initiatives that require 11-digit account numbers, agents of a financial advisory firm asked investors to change their account numbers. They even offered to do it free of cost for the investors saying that unless they update their account number, their redemption amount or dividend may be transferred to someone else’s account. The investor clients are asked to sign a transaction form which prominently displays the bank account number but conceals the ‘change in sub-broker’ column that is placed at the bottom of the form,” the IFA revealed.

According to unconfirmed reports, UTI and DSP BlackRock carried out a check on the forms received by them pertaining to change of broker. When these two asset management companies called their investor clients, what they found out was shocking. Out of every 10 customers, six were not even aware of any mandate like this (the change of sub-broker).

This brings to light that most investors have not read the fine print before signing the dotted line and were literally duped into entering into a false contract. So be careful the next time, while signing any documents, especially one from a fund distributor or financial advisory firm.

  • Like this story? Get our top stories by email.




    1 decade ago

    Easy to blame everything on the brokers, IFA's & everyone else. But wasn't these issues bought up long time before the no entry rule coming in. still the regulator like some dumb JACKA** wanted to play the unfair game. I don't see how this rule has benefited the common man. More black money getting infused in the system. More of dirty tricks being played & even more useless gossip


    1 decade ago

    In a country where mass 98% don't know what is mutual fund there every thing could be possible.
    Now we are listening that mutual fund can be buy through stock exchange mechanism & a 350000 terminal will be very soon available to promote the mutual fund even in most remote part of our country.Alas again that cruel 98% figure flashing.Day or night whats the difference to
    a blind person.Its not like a rice-wheat-sugar that price is cheap jump to buy,uff..again that 98% idiots of our society.To sum up who will enter in a broker terminal to buy mutual fund units in morning its guaranteed that in the evening that person will return home with pretty stocks in his portfolio & not mutual fund.Idiot 98%...& super idiot market regulator the worthless pan chewing sarkari babus...

    R Balakrishnan

    1 decade ago

    In many cases, IFA's are looking to sell out their existing AUM to big distributors. One of the large distribution houses, linked to an industrial house, has been'buying' clients of IFA's. Anyways, any distributor of financial products has no business to complain about 'ethics'


    1 decade ago

    SEBI has given free hunting and killing ground of IFA's by big players like NJ,Prudent and offcourse banks-who use all tricks and technology to influence clients-but at a very high cost-and often misguiding clients-they put client in such a condition like GALE KA FANDA-rope tightend to neck-which client recognises later but cant get out-like switching of open ended schemes to tax savers-to earn more upfront and guaranteed trail of 3 yrs-this is all done by big players-bcos they want money at any cost-they dont bother to retain client-by proper advice-but still is sleeping SEBI over all ground facts-IT SEEMS IN A YEAR ALL IFA'S WILL BE VANISHED AND ONLY BIG PLAYERS WILL HANDLE WHOLE MF INDUSTRY LIKE PUPPETS IN HANDS OF THE KATHPUTLI MASTER.

    Markets dangerously poised

    Weak global cues weighed heavily on Indian markets

    Indian markets slipped ahead of rate decisions from the European Central Bank and the Bank of England later in the day, and on the back of weak global cues. The Sensex closed at 16,225, down 271 points from the previous day’s close while the Nifty declined 87 points to close at 4,845. 

    We had said yesterday that Indian markets will check their gains today and they did so. However, bourses are on an edge now. Check out 16,100 for support. If this level is breached, we may see a sharp downfall.

    As per reports, the two top stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have decided to hold a special trading session on Saturday, 6 February 2010, as the NSE is testing an upgraded trading system. Trading will begin at 11:00 IST and end at 12:30 IST.

    At 11:00 hrs IST the Sensex was trading at 16,378, down 118 points from the previous day’s close. However, at 13:00 hrs IST, the Sensex declined 107 points from the previous day’s close and was trading at 16,389.

    At the end of the day, Housing Development Finance Corporation (HDFC) declined 3% after the RBI announced that it would disallow non-banking finance companies (NBFCs) and housing finance companies (HFCs) from resorting to short-term foreign currency borrowings.

    The RBI cited prevailing macroeconomic conditions and improvements in domestic credit and liquidity conditions for this move. This is seen as part of the central bank’s efforts to gradually reverse its soft money policy.

    Wipro Consumer Care and Lighting, the FMCG arm of Wipro, is reportedly in advanced talks to buy Nigeria-based skincare company Tura International. The stock was down 3%.

    Telecom stocks declined on reports that the auction for the much-awaited 3G mobile phone services may not be held by 31 March 2010. Bharti Airtel fell 2% while Reliance Communications declined 4%.

    Oil & Natural Gas Corporation rose 1% after a report from an expert group headed by Kirit Parikh on Tuesday suggested freeing petrol and diesel prices as well as raising LPG rates by Rs100 a cylinder and kerosene prices by Rs6 per litre. The Parikh committee’s suggestions, submitted to petroleum minister Murli Deora, would see a hike of Rs3 per litre in petrol and Rs3-Rs4 per litre hike in diesel, if implemented. GAIL India was up 3%.

    Aurobindo Pharma has received the final approval for Cetirizine Hydrochloride Solution (1 mg/ml) from the US Food & Drug Administration (FDA). The stock was up 2%.

    During trading hours, government data released showed that food inflation rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week following rising prices of potato and pulses. The inflation for primary articles, which includes food and non-food items, marginally eased to 14.56% in the reporting week from 14.66% in the previous week. The fuel price index rose 5.88%.

    During the day, Asia’s key benchmark indices in Taiwan, Hong Kong, Japan, China and Singapore were down by between 0.08%-1.84% while South Korea’s index rose 0.09%.

    As per reports, Australia’s Bureau of Statistics said that retail sales in December 2009 sank 0.7% from November 2009. This was lower than median forecast of economists of a 0.2% gain.

    On Wednesday, 3 February 2010, the Dow Jones Industrial Average and the S&P 500 fell 26 points and 6 points respectively on reports that the US president pledged to complete banking and healthcare reform while the Nasdaq Composite index rose 1 point.

    As per US reports, the ISM Non-Manufacturing Index rose to 50.5 in January from 49.8 in December, but fell short of economists’ expectations of 51. On the jobs front, ADP reported that 22,000 jobs were lost from private payrolls in January.

    However in premarket trading, the Dow was trading 53 points down.


  • Like this story? Get our top stories by email.


    IMF says India to grow 8% in FY11

    The Fund said that with India’s long-term prospects remaining strong and private sector balance sheets sound, it expects growth to be back on track in 2010-11 even if advanced economies grow below trend

    The International Monetary Fund (IMF) said that it expects India to grow at 8% in FY11 from 6.75% in FY10 with expected momentum in non-agricultural gross domestic product (GDP).

    In a note, under Article IV of the IMF's Articles of Agreement, the Fund said that with India’s long-term prospects remaining strong and private sector balance sheets sound, it expects growth to be back at potential in 2010-11 even if advanced economies grow below trend.

    Private consumption would benefit from better employment prospects and less uncertainty, investment would be boosted by robust corporate profits, rising business confidence, and favourable financing conditions, the IMF said.

    The Fund said that it sees India's merchandise exports increasing by 22.1% to $178 billion in FY11 from $145.80 billion estimated in FY10 and imports rising 20% to $310.80 billion in the next fiscal year.

    India's near-term risks are broadly balanced, the Fund said, adding that an acceleration of reforms and capital inflows could spur investment in the country. However, there are key risks like elevated inflation and financing constraints arising from—among other things—the fiscal deficit, which could put breaks on the recovery, the IMF said.

    Terming India's growth prospects in the medium-term as 'bright', the Fund said that the country was not at the centre of the global crisis and its growth is well-balanced and mainly reliant on domestic drivers. There could be some risks such as difficulties in implementing productivity-enhancing reforms and continued supply bottlenecks to this favourable outlook, the Fund warned.

    Given long transmission lags and the low policy rates, most directors of the IMF advised a timely start of the withdrawal of monetary stimulus that would help anchor inflation expectations and soften the impact on long-term interest rates.

    The IMF said that most of its directors considered that rupee appreciation would help contain inflation and manage capital inflows, although a few directors argued for caution in this area. Sterilised intervention could help reduce excessive exchange-rate volatility, provided it does not generate further inflows, the Fund said.

    The directors of the IMF also stressed the importance of developing a vibrant corporate bond market and reforms that would foster greater participation by pension funds and the insurance sector in funding infrastructure.


  • Like this story? Get our top stories by email.


    We are listening!

    Solve the equation and enter in the Captcha field.

    To continue

    Sign Up or Sign In


    To continue

    Sign Up or Sign In



    online financial advisory
    Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
    online financia advisory
    The Scam
    24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
    Moneylife Online Magazine
    Fiercely independent and pro-consumer information on personal finance
    financial magazines online
    Stockletters in 3 Flavours
    Outstanding research that beats mutual funds year after year
    financial magazines in india
    MAS: Complete Online Financial Advisory
    (Includes Moneylife Online Magazine)
    FREE: Your Complete Family Record Book
    Keep all the Personal and Financial Details of You & Your Family. In One Place So That`s Its Easy for Anyone to Find Anytime
    We promise not to share your email id with anyone