compliance simplified

Clarifications with regard to Direct Plan (MF) by MFDs, RIAs, Portfolio Managers & Stock Brokers

SEBI/IMD1/DoF-1/SK/2021/25517/1         September 6, 2021

 

Subject: Clarifications sought by AMFI with regard to transactions under Direct Plan in MF units by MFDs, RIAs, Portfolio Managers & Stock Brokers

 

This has reference to your email dated October 1, 2020 on the captioned subject. In this regard, our comments are as below:

 

(1) If any entity is acting as a Mutual Fund Distributor (MFD) for a particular client, then he cannot deal in direct plans for such a client and thus, the question of data feed of such plans do not arise.

 

(2) With respect to SEBI registered intermediaries (Stock Broker / Investment Adviser (IA) / Portfolio Manager (PMS)), it may noted that in terms of Regulation 4 (g) of the SEBI (Investment Adviser) Regulations 2013 [the IA Regulations], PMS / stock brokers are required to comply with the general obligations and responsibilities specified in Chapter III of the IA Regulations which inter alia provides that client segregation of advisory and distribution activities needs to be ensured at the entity level and group level. Further as per Regulation 22(1) of the IA Regulations, an individual IA cannot provide distribution services. Accordingly,

 

(a) In case a stock broker / non individual IA / PMS is offering distribution service to the client, they can offer only Regular Plans for that client using their distributor code / AMFI Registration Number (ARN). Accordingly they may have visibility of their client's transaction data feeds only for such plans

 

(b) In case a stock broker / non individual IA / PMS is offering advisory services to the client, they can execute / invest only in direct plans of Mutual Funds for that client using their Broker / IA / PMS code. Accordingly they may have visibility of their client's transaction data feeds only for such plans. They will not be entitled to commissions / compensation in any form, from the Asset Management Companies (AMCs).

 

(3) In terms of SEBI Circular dated November 28, 2002, all entities engaged in selling and marketing i.e. distribution of mutual fund units (distributors, agents, brokers, sub brokers or called by any other name, whether individuals or of any other organisation structure) should be registered with AMFI. Accordingly they have to quote a valid ARN and Employee Unique Identification Number (EUIN), in order to place transactions in Regular Plans and receive commissions, as per extant requriements.