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Due Diligence requirement for MF Distributors
- 1. DUE DILIGENCE VIDE CIRCULARNO. CIR/IMD/DF/13/2011 DATED 22 AUGUST 2011
- 2. SEBI Mandated theAMCs/ Mutual Funds - to regulate the distributors in the interest of investors to put in place a due diligence process to satisfy themselves about the fit and proper criteria of their distributors
- 3. ROLE of AMFI To design a unified due diligence exercise on behalf of AMCs and in accordance with the SEBI guidelines/ circulars To appointed Chartered Accountant firms for conducting this exercise.
- 4. What AMFI coded? Oath : Consider investor's interest as paramount and take necessary steps to ensure that the investor's interest is protected in all circumstances SEBI is your big boss and I am the MD and AMC are your reporting boss Recommend schemes appropriate for the investor's risk profile and needs Highlight risk factors of each scheme, desist from misrepresentation and exaggeration Commission disclosure should be comparative and simple Maintain necessary infrastructure to support the AMCs in maintaining high service standards to investors
- 5. AMFI codes -2 Do not undertake commission driven malpractices Abstain from making negative statements about any AMC or scheme and ensure that comparisons, if any, are made with similar and comparable products along with complete facts Shall keep themselves abreast with the developments relating to the Mutual Fund Industry Intermediaries shall not rebate commission back to investors Shall ensure that the employees quote the EUIN in the Application Form for investments Be diligent in attesting / certifying investor documents and performing In Person Verification (IPV) of investor's
- 6. AMFI codes -3 Concealment of information and facts to make a scheme look attractive will be deemed the bigger misconduct than providing the wrong information Render at all times high standards of service, exercise due diligence, and ensure proper care ( CRM, feedback, evaluation, complaints etc) Be informed that , any switches made after 1st January 2013, in a Reg to Direct Pan will attract claw back ( full or proportionate) Intermediaries satisfying the criteria specified by SEBI for due diligence exercise, shall maintain the requisite documentation in respect of the "Advisory" or " Execution Only" services provided by them to the investors
- 7. WHAT WILL YOUACHIEVE THROUGH DDQ ? Due Diligence will help you achieve a most perfect base and guideline for your distribution business
- 8. ASPECTS COVERED INDDQ -1 Organizational controls to ensure that the following processes are delinked from sales and relationship management processes and personnel: Customer risk profile/ investment objective evaluation Mutual Fund scheme evaluation and defining its appropriateness/ suitability to various customer risk categories;
- 9. ASPECTS COVERED INDDQ -2 Review Your Management processes of Compliance and risk management functions the disclosures made by you to the customer your ‘Advisory’ or ‘Execution only’ modle, in respect of the customer relationship and transactions
- 10. ASPECTS COVERED INDDQ -3 Record of regulatory/ statutory levies, fines and penalties, legal suits, customer compensations made, causes for these and resultant corrective actions taken , if any
- 11. HOW QUESTIONS AREDIVIDED ? Section 1: About the Distributor Section 2: Organization Structure Section 3: Mutual Fund Business Activities Section 4: Customer Related Processes Section 5 : Human Resources Management Section 6: Compliance and Risk Management Section 7: General Operations Section 8: Legal
- 12. Section 1: Aboutthe Distributor This speaks about your profile, education and core competency
- 13. Section 2: OrganizationStructure MF distribution is a business which grows by Time Value and Sales Value. In this Section, they want you to decide your long term business structure : It should be trustable model for whole life servicing guarantee It should have a multi generation model It should be clearly defined in terms of successor and hierarchy
- 14. Adopting a CRMtool is the key Leadsqaure Zoho …etc
- 15. Section 3: MutualFund Business Activities Financial Planning Risk Profiling Product Suitability Process Transaction Process Welcome Kit Evaluation and Feedback Process
- 16. Section 4: CustomerRelated Processes Onboarding Process Order Management Process E mail Order Form Order Execution Process Offline – through individual AMC forms Offline – through RnT Common Form Online – through RnT Platform Online – through NSE/BSE/MFU platform Online – through Client End portal or App Order confirmation Process Phone E Mail Letter
- 17. Section 5 :Human Resources Management They seek your method of hiring the right team who will follow the compliance during the working They seek your method of incentivicing the team , to ensure that there is no sales biasness
- 18. Section 5 :Human Resources Management Do you have a clear cut KPIs for your Team which is in customer’s interest? Do you have a regular Training and update process for yourself and your Team ? Do you have a centralized number, standard E mail and common query center to avoid person dependent support services ? Do you have a process of educating the Team members with regulators circulars and business vision
- 19. Compliance and RiskManagement Do you have any Risk Management Strategy for your business ? Data Risk Transaction Risk KYC and wrong investments Risk Team Insurance Office Insurance ..etc Do you have any Compliance process in Place ? EUIN KYD Certifications System Audit Transaction Audit Environment HR related – EPF, etc
- 20. Section 7: GeneralOperations Branches Websites Mobile App Office Timings
- 21. Section 8: Legal Disclaimers Letter Heads and other stationary Advertisements Communications Addendums and changes Disclosure
- 22. SAMPLE SHEET OFDDQ Mail me at admin@armfintech.com for your queries Or contact Abhinesh Kumar, Mobile : 9307218766 Website : http://armfintech.com