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Amfi bars 4 Mutual Fund agents for misselling

Fund Houses Asked To Suspend Commission And Incentives To Erring Distributors

 

THE Association of Mutual Funds of India (Amfi), an industry body representing fund houses, has directed its members not to deal with four distributors allegedly involved in corrupt practices. 

   The barred entities are alleged to have involved in misselling fund products to investors. Misselling describes a wide array of common malpractices such as selling products which are not suited for a particular investor. Investors have also lodged complaints regarding misappropriation of money by the erring entities. However, the distributors blacklisted by Amfi don't figure among the country's top financial advisors. 

   "Some distributors were carrying out fraudulent activities due to which investors were suffering losses. After seeking explanations from the distributors, we immediately suspended them," said Amfi chairman AP Kurien. "Amfi has asked fund houses to suspend payment of commission and incentives to select financial advisors," said a senior fund official. 

   Mutual fund products are distributed by banks, independents distributors and independent financial advisors. Among the top distributors are HDFC Bank, HSBC, Standard Chartered Bank and independent entities such as NJ India, Bajaj Capital and Blue Chip. Besides institutional sellers, there are about 65,000 independent financial advisors selling mutual fund schemes to retail investors. Mutual funds compete vigorously to sell their products resulting in distributors being wooded by all the fund houses. 

   All the 65,000 mutual fund agents in the country have an Amfi registration number (ARN) and have to follow a code of conduct mandated by Sebi. Every year, Amfi takes a self certificate from all the ARN holders stating that she/he has followed the code of conduct. 

   At present, there are more than 30 lakh insurance and mutual fund agents and bank officials selling retail financial products in India.
   "They serve about 188 million investors holding financial assets. Of these, eight million investors participate in debt and equity markets, either directly or indirectly through complex and risk-bearing products like mutual funds and market-linked insurance plans. It drives home the need for order," according to a report by a government-appointed committee which was examining the financial services industry.

 


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