Chapter 5 mutual Fund
- 1. Dr. Ankit Jain 1
- 2. Individual Distributor are known as Independent Financial Advisors (IFA) Institutional distributor can be distribution houses, banks or NBFC. Dr. Ankit Jain 2
- 3. Online Mutual Fund Distribution Distributors through Stock exchange. Platform to purchase and sale of mutual fund in NSE is NEAT and in BSE is BSE Stars. Dr. Ankit Jain 3
- 4. AMC appoint mutual fund distributors by entering into distribution agreements. Appointment/Termination of distributor is the discretion of the AMC. AMC does not require SEBI approval for appointment or termination. Dr. Ankit Jain 4
- 5. Individual distributors and employees or representative of institutional distributors have to clear the NISM Mutual Fund Distributor Certificate Examination. Need to obtain the AMFI registration number (ARN) before they can seek register with AMC. Institutions in the distribution business also need to get registered with AMFI. The certificate is valid for 3 years, after which it has to be revalidated by attending a Continuing Professional Education (CPE) programme or reappear in NISM exam. Dr. Ankit Jain 5
- 6. There are two types of commission: Initial or Upfront Commission Trail Commission Dr. Ankit Jain 6
- 7. Initial or Upfront Commission was actually paid by AMC on the amount mobilized by the distributor. Earlier it is collected in the form of entry load. Since entry load is nil now. Upfront commission to distributor will be paid by the investors directly to the distributor, based on various factors including the service rendered by distributors. Currently, mutual funds are paying distributors upfront fees as high as 1.5-2 per cent, against the 1 per cent recommended by AMFI. Dr. Ankit Jain 7
- 8. It is paid on the market value of investors investment. It is paid till investors redeem their units. The trail commission is normally paid by the AMC on a quarterly basis. For e.g an investors invest Rs 4 lakh in 2008 and redeems in 2018. In this case trail commission is paid every year till 2018. No commission for their own investment. Generally the rate of trail commission is 0.5%. Dr. Ankit Jain 8