Guide certificate

This is to certify that the internship project titled “Study on the role of IFAs in
developing Mutual Fund industry” submitted in partial fulfillment of the requirement for
the degree of Master of Business Administration to L. N. Mithila University, Darbhanga is
a record of original work carried out by Rafi Ahmad khan. Under my supervision and
guidance and that no part of this report has been submitted for the award of any other
degree, diploma, and certificate.

Place:New delhi Name of the guide

Designation
Date:

1
 ACKNOWLEDGEMENT

I sincerely express my gratitude to all those who made possible for me to complete this
report. I would like to thank the UTI Asset Management Company Ltd, Nehru place, New
Delhi for giving me permission to commence this report. My gratitude to the faculty
members of DEPARTMENT OF COMMERCE & BUSINESS ADMINISTRATION,
L.N.MITHILA UNIVERSITY,DARBHANGA to go through this project and to extend my
learning beyond the academic curriculum.

I thank my company guide Mr.Mukesh kapoor, Mr.Gyaneshwar

Tongria,Mr.Rajesh.K.Sankhla and Mr.Sharique Alam who are managers of UTI MF at
Nehru Place who have been a source of constant inspiration for me. I shall be indebted
to them for their guidance, co operation and confidence.

I would also like to thank Mr.D.K.Singh Vice President of UTI Mutual fund, New Delhi
who has been singularly responsible for all the knowledge that I have assimilated during
the past two month. His confidence boosting talk helped me go a long a way during the
course of project.

This pleasure would not have been ours without the firm support extended to us by my
friend. I thank them for their valuable suggestion towards the preparation of this report.

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 Contents
ACKNOWLEDGEMENT
CHAPTER1: INTRODOCTION
1.1Concept of mutual fund
1.2 UTI mutual fund in brief
1.3UTI mutual fund strength
1.4 History of mutual fund in India
CHAPTER2: INDEPENDENT FINANCIAL ADVISORS
2.1IFAs introduction
2.2 code of ethics
2.3KYD process
2.4 No entry load on mutual fund
2.5 AMFI guideline for IFAs
2.6 NISM guidelines
2.7 function of IFAs
2.8 Rules to improve investor’s financial future
2.9 Selecting a mutual fund
2.10 Benefits of becoming IFAs
2.11 New move ny AMFI for IFAs
CHAPTER3:IFAs IN UTI
3.1Oppurtinity to IFAs in UTI
3.2what makes unique UTIIFAs
3.3Benefit, reward and recognition for IFAs
3.4Communication to IFAs
CHAPTER4:IFAs VIEW ABOUT DIFFERENT AMCs

CHAPTER5: RECOMMENDATION AND CONCLUSION

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CHAPTER-1 INTRODUCTION
1.1Concept of mutual fund
1.2 UTI mutual fund in brief
1.3UTI mutual fund strength
1.4 History of mutual fund in India

4
 CONCEPT OF MUTUAL FUND
A mutual fund is a trust that pools the saving of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instrument such as share, debenture and other securities. the income earned through
these investment and the capital appreciation realized is shared by its unit holder in
proportion to the number of units cowned by them. Thus a mutual fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of mutual fund.

INVESTOR Fund
S manager

Returns securites

BENEFITS OF MUTUAL FUND

 Professional management: The major advantage of investing in mutual fund is
that you get a professional money manager for a small fee. you can leave the
investment decision to him and only have to monitor the performance of the fund
at regular interval.
 Diversification: Reduce risk by spreading your investment over several asset
classes as well as several companies, both within and across several sectors.
 Liquidity: Enjoy more liquidity than most other investment option; like real estate

where part sell is not possible. Whereas an open ended scheme can be

bought or sold on any business day.

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 Affordability: mutual fund allows starting with small investment. Your investment
can be as small as Rs 500 and you can still reap the benefits of investing in the
securities market
 Low transaction cost :Transaction costs are much lower than what individual
have to pay, since large amount of securities are being bought and sold at a time
 Transparency: Ensures complete transparency of information such as where your
money is being invested and the present value of your investment.
 Tax breaks: you do not have to pay any taxes on dividend issued by mutual fund.
you also have the advantage of capital gain taxation. Tax saving scheme and
pension scheme give you added advantage of benefit under sec 88.invesment up
to Rs 10000 in them qualify for tax rebate.

TYPES OF MUTUAL FUND SCHEME

A wide variety of mutual fund scheme exist to cater the need such as financial
position ,risk tolerance and return expectation etc.
(1). Growth schemes:
Aim to provide capital appreciation over the medium to long term. these scheme
normally invest a majority of their fund in equities and are willing to bear short
term decline in value for possible future appreciation .these scheme are not for
investors seeking regular income or needing their money back in the short term.
 Ideal for: Investor in their prime earning year & investor seeking growth
over the long term
(2). Income schemes:
Aim to provide regular and steady income to investors. These scheme generally
invest in fixed income securities, such as bond and corporate debenture. Capital
appreciation in such scheme may be limited.

Ideal for: Retired people and other need for capital stability and regular
income.

(3). Balanced schemes:

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Aim to provide growth and income by periodically distributing a part of the income
and capital gain they earn. They invest in both shares and fixed income
securities in the proportion indicated in their offer document.
Ideal for: Investors looking for a combination for a income and moderate
Growth
(4) Tax saving schemes;
These schemes offer tax rebates to the investors under tax laws as prescribed
from time to time. This is made possible because the government offer tax
Incentives for investment in specified area for instance like ,Equity linked saving
Schemes (ELSS) and pension scheme.
Ideal for: investor seeking tax rebate
(5) Index fund schemes:
These schemes attempt to replicate the performance of a particular index and
are ideal for investors who are satisfied with a return approximately equal to
that of an index.
(6) Sectoral fund schemes: These schemes invest in specific industries
and are ideal for investors who have already decided to invest in particular
sector.
(7) Money market schemes:
Aim to provide easy liquidity, preservation of capital and moderate income.
these scheme generally invest in safer, short term investment, such as treasury
billls,certificate of deposits., commercial paper and inter bank call money.
Return on these scheme may fluctuate, depending upon the interest rate
prevailing in the market.

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 UTI MUTUAL FUND IN BRIEF

Unit Trust of India (UTI) was established in 1964 through an act of the Indian
parliament. Various government owned/controlled financial institution and banks
contributed to the initial capital of UTI.UTIMF grew into on of the biggest financial
institution. in the Indian capital market. UTIMF provided avenues for saving
/investment through wide variety of fund suiting the varying needs of people from
all walks of life. investor of UTI MF include resident individual, NRI, children
,working professional, women ,retired individual, institution and companies .UTI
MF has launched various scheme over the year to meet the diverse need of the
variety of investors. UTI MF has distributed more than Rs 11,294 crores as
dividend under its various scheme/plan since February 01,2003 to August 31 ,2010.uti
has also played a pioneering role in the development and growth of the Indian
Economy and the capital market.

UTI mobilized funds through various saving plan and scheme which were either
pure Mutual Fund products(with no assurance to income or capital protection) or
pure saving schemes/ product(with assurance of return and protection of capital).
 Equity hold by reputed financial institutions
 T Rowe Price group (26%)
 Life insurance Corporation of India (18.5%)
 State Bank of India (18.5%)
 Punjab National Bank of India (18.5%)
 Bank Of Baroda (18.5%)

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 UTI MF-STRENGTH
 One of the largest Mutual fund in the country-Asset Under Management-
Rs67, 189Crores as on May 2011.
 80 domestic schemes under various fund categories like Equity Fund,Index
fund, Asset allocation funds, Balanced Fund, income fund, Liquid fund
&Interval fund.
 Trusted by over 1 crore investors
 The most preferred Mutual Fund in the CNBC Awaz consumer survey for
2009
 Voted super brand 2008 by NDTV Profit Awards 2008
 Best debt Fund House and star fund house by NDTV profits 2008 and ICRA
Award 2009&2010 respectively.
 Strategic Marketing tie up with PSU BANKS,Selected Pvt. Banks &Indian
Post.
 Offshore scheme &domestic schemes to cater to whole gamut of investment
needs. . Around 82 domestic schemes.
 UTI AMC PVT. LTD has its corporate office in Mumbai. it has two 100%
subsidiary namely UTI International Ltd. IT WORKS AS AN Investment
Manager to UTI MF .Offshore Funds, wealth management services beside
providing support services to SUUTI.
 UTI has 149 Domestic Branches ,which are called UTI financial centers(UFC)
and overseas Branch at London and representative offices at Dubai and
Bahrain
 UTI has around 779 staff members. Chief Investment officers supported by
six fund manager ,Chief Marketing officers supported by 18 member core
marketing team,144 Chief Manager,498 Relationship Manager, and over
40,000 IFAs

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  UTI MF has won three International Best of Best Award 2010 from ASIA
ASSET MANAGEMENT.
(a)Best Fund House in India
(b)Best Investor Education in India
(c)Most Innovative Award for investor education in Asia.

HISTORY OF MUTUAL FUND

The history of mutual fund in India can be divided into 5 phases:

First phase (1964-87):

The unit trust of India was the sole player in the industry. it was set up by RBI and
functioned under the regulatory and administrative control of the RBI.In 1978 UTI was
de linked from the RBI and the IDBI took over the regulatory and administrative control in
place of RBI.The first scheme launched by UTI was Unit scheme 1964.At the end of
1988 UTI had Rs6,700 crores of asset under management.
Second phase (1987-1993):
In 1987 public sector banks and financial institution entered the mutual fund industry’s
mutual fund was the first non UTI fund to be set up in 1987 followed by Canbank mutual
fund(Dec 87) ,PNB mutual fund(Aug 89),Bank of India mutual fund(jun 90),Bank of
Baroda Mutual fund(Oct 92). Also LIC established mutual fund in jun 1989 while GIC in
Dec 1990.Most of the fund during this phase was growth oriented closed ended fund.At
th end of 1993, the MFindustry had asset under management of Rs 47,004 crores.
Third phase (1993-1996):
In 1993, the mutual fund industry was open to private sector player ,both Indian and
foreign. SEBI`s first set of regulation for the industry were formulated in 1993,and
substantially revised in 1996.significant innovation in servicing ,product design and
information disclosure happened in this phase, mostly initiated by private sector players.

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The erstwhile Kothari Pioneer (now merged with Franklin Tempton)was the first private
sector mutual fund registered in July 93.

Fourth phase (1996-1999):

The implementation of the new SEBI regulation and the restructuring of the mutual fund
industry led to rapid asset growth Bank mutual fund were recast according to the SEBI
recommended structure, and Uti CAME UNDER VOLUANTRY SEBI supervision.
Fifth phase (1999-2003)
This phase was marked by very rapid growth in the industry ,and the significant increase
in market share of private sector players. Asset crossed Rs 1, 00,000 crore.The tax
break offered to mutual funds in 1999 created arbitrage opportunities for a number of
institutional players. Bond funds registered the highest growth in this period, accounting
for nearly 60% of the asset. UTI share of the industry dropped below 50%.

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CHAPTER-2 IFAs
2.1IFAs introduction
2.2 code of ethics
2.3KYD process
2.4 No entry load on mutual fund
2.5 AMFI guideline for IFAs
2.6 NISM guidelines
2.7 function of IFAs
2.8 Rules to improve investor’s financial future
2.9 Selecting a mutual fund
2.10 Benefits of becoming IFAs
2.11 New move by AMFI for IFAs

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INDEPENDENT FINANCIAL ADVISORS

Independent financial advisers or IFAs are professional who offer

independent advice on financial matters to their client and recommended suitable
financial product from whole of the market. The term was developed to reflect a UK
regulatory position and has a specific UK meaning, although it has been adopted in
other part of the world.
The term “IFAs” was coined to describe the adviser working independently for their
clients rather than an insurances company. At the time(1988) the UK government was
introducing the polarization regime which forced advisers to either be tied to a single
insurer or to be an independent practioner. The term is commonly used in the United
kingdom where IFAs are regulated by the financial services Authority (FSA) and must
meet strict qualification and competence requirement.
Typically an IFAs will conduct a detailed survey of their client financial position
,preferences and objective; this is sometimes knows as `fact find`.The IFAs will then
advise appropriate action to met the client objectives; and if necessary recommended a
suitable financial product to match the client need. Ideally, the financial advisors helps
the client maintain the desired balance of investment income, capital gain and
acceptable level of risk by using proper asset allocation.

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 We can say that IFAs are professional financial planner who
understands the universe of investment options. He is well informed on the risk and
return attribute of these options. He uses this knowledge to be able to advise investors in
financial planning, and enable them to choose investment option that suit their needs
best. While doing this, he also builds in the client ability to save, appetite for risk,
requirement for cash flows, and tax status. He is able to create investment portfolios that
help investors meet their financial goal, after taking into account these factors specific to
investors.

ATTRIBUTE OF GOOD IFAs

The following are some of the important traits of a good IFAs
a) Sound understanding of the universe of investment products, their risk and return
attribute, past performance, and the behaviors of portfolio of asset classes.
b) Good grounding in tax planning and estate planning.
c) Ability to convert life cycles of investors into needs and preferences for financial
product.
d) Organized approach to work and ability to professionally manage ones business.
e) Ability to understand and work with investors and excellent communication and
inter personal skills.

CODE OF ETHICS
Following are the code of ethics that IFAs have to followed:

3.1Take necessary steps to ensure that the clients’ interest is protected

3.2Adhere to SEBI Mutual Fund Regulations and guidelines issued from time to time
related to selling, distribution and advertising practices. Be fully conversant with the key
provisions of the Scheme Information Document (SID), Statement of Additional
Information (SAI) and Key Information Memorandum (KIM) as well as the operational
requirements of various schemes.

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3.3 Provide full and latest information of schemes to investors in the form of SID,
performance reports, fact sheets, portfolio disclosures and brochures and recommend
schemes appropriate for the client’s situation and needs.
3.4 Highlight risk factors of each scheme, avoid misrepresentation and exaggeration and
urge investors to go through SID/KIM before deciding to make investments.
3.5 Disclose to the investors all material information including all the commissions (in the
form of trail or any other mode) received for the different competing schemes of various
Mutual Funds from amongst which the scheme is being recommended to the investors.
3.6 Abstain from indicating or assuring returns in any type of scheme, unless the SID is
explicit in this regard.
3.7 Maintain necessary infrastructure to support the AMCs in maintaining high service
standards to investors and ensure that critical operations such as forwarding forms and
cheques to AMCs/registrars and dispatch of statement of account and redemption
cheques to investors are done within the time frame prescribed in the SID/SAI and SEBI
Mutual Fund Regulations.
Note SID should be read in conjunction with SAI and not in isolation.
3.8 Avoid colluding with clients in faulty business practices such as bouncing cheques,
wrong claiming of dividend/ redemption cheques, etc.
3.9 Avoid commission driven malpractices such as:
(a) Recommending inappropriate products solely because the
Intermediary is getting higher commissions there from.
(b) Encouraging over transacting and churning of Mutual fund
Investments to earn higher commissions, even if they mean
Higher transaction costs and tax for investors.
3.10 Avoid making negative statements about any AMC or scheme and ensure that
comparisons, if any, are made with similar and comparable products.
3.11 Ensure that all investor related statutory communications (such as changes in
fundamental attributes, load, exit options and other material aspects) are sent to
investors reliably and on time. Members and their key personnel, in the conduct of their
business shall observe high standards of integrity and fairness in all dealings with
investors, issuers, market intermediaries, other members and regulatory and other
government authorities.
3.12 Maintain confidentiality of all investor deals and transactions.

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3.13 When marketing various schemes, remember that a client’s interest and suitability
to their financial needs is paramount, and that extra commission or incentive earned
should never form the basis for recommending a scheme to the client.
3.14 Intermediaries will not rebate commissions back to investors and avoid attracting
clients through temptation of rebates / gifts etc.
3.15 A focus on financial planning and advisory services ensure correct selling, and also
reduces the trend towards investors asking for pass back of commission.
3.16 All employees engaged in sales and marketing should obtain AMFI1
1 Since June 1, 2010 NISM-Series-V-A: Mutual Fund Distributors Certification
Examination is the mandatory examination for all for all persons involved in selling and
distributing mutual funds
including: • Individual Mutual Fund Distributors
• Employees of organizations engaged in sales and distribution of Mutual Funds
• Employees of Asset Management Companies specially persons engaged in sales and
distribution of Mutual Funds\ Certification. Employees in other functional areas should
also be encouraged to obtain the same certification.

KNOW YOUR DISTRIBUTOR

Following are the process of KYD which a IFAs need !
A Know Your Distributor (KYD) Process for Mutual Fund Distributors. Document
Verification
The distributors will have to submit their applications for registration with AMFI, along
with the KYD application (Refer annexure 1) and self attested photocopies of relevant
documents as mentioned against their respective category in the table below. AMFI has
engaged the services of Computer Age Management Services Ltd. (CAMS) to carry out
the KYD process through their centers in 60 locations initially (hereinafter referred to as
“CAMS Point of service” / “CAMS POS”). KYD application along with the requisite
documents could be submitted at any of the CAMS POS, a list of which is available at
www.amfiindia.com or www.camsonline.com. The distributors are required to produce, in
person, the original documents for over the counter verification at the time of submission
of their applications along with self attested photocopies of the same.
Category of ARN holder KYD Documents required to be submitted
Documents for Identity Documents for address proof (any one of the

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Proof following)
Individuals & Photo PAN Card
Senior Citizens (Mandatory) i) Ration Card (Vernacular
language)
ii) Passport
iii) Latest Demat/ Bank Account
Statement **
iv) Voter Identity Card
v) Latest Utility (Electricity /
Municipal tax/ Water-tax/ Land Line
Telephone) Bill*
vi) Driving License
vii) Lease / Sale Agreement of
Residence

Proprietary If the address of the proprietary concern

Concern i) PAN card of and the proprietor is same, the following
the Concern (if documents in the name of proprietor :
available) or i) Ration Card (Vernacular
ii) Photo PAN language)
card of the Proprietor ii) Passport
iii) Latest Demat / Bank Account
Statement **
iv) Voter Identity Card
v) Latest Utility (Electricity/
Municipal tax/ Water-tax/ Land Line
Telephone) Bill*
vi) Driving License
vii) Lease / Sale Agreement of
Residence

In case location of concern is different,

then the following documents in the name
of proprietary concern:

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 i) Latest Bank Account Statement **
ii) Latest Utility (Electricity/
Municipal tax/ Water-tax/ Land Line
Telephone) Bill *
iii) Lease/ Sale Agreement of office

B. Bio-metric :
The Bio-metric process involves taking impression of right hand index finger and
registering the same for identification purpose. The said process will be carried out at the
CAMS POS, at the time of submission of applications for registration or renewal of ARN
alongwith KYD application form.

person for Biometric registration.

-metric is required to be carried out for the

authorised persons/ officials as indicated in the below mentioned table:-

Category of ARN holder Persons required to undergo bio-metric process

Proprietary Concern Proprietor
Partnership firm All the Partners
HUF Karta of HUF and the signatory to the application (if the
signatory is a person other than the Karta).

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Societies & Trust
Corporates (Pvt./ Public
Ltd. Co., Banks, NBFC)
Principal Officer/Chief Trustee and the signatory to the
application (if the signatory is a person other than these
officials).
Authorized official who has signed ARN application

In case of non individual entities, the persons who are required to undertake bio-metric
process as indicated in the above table are also required to comply with the document
verification process by submitting the required documents i.e. proof of identity and proof
of address as applicable to individual applicants.
KYD Process flow
1) Distributors have to visit nearest CAMS POS with duely completed KYD
applications, self attested photocopies of relevant documents and 2 self attested
passport size color photographs.
2) Also carry original documents and get the photocopies verified with original by
CAMS official.
3) Obtain the acknowledgement from the CAMS POS confirming completion of
KYD process.
4) The existing ARN holders will have to send photocopy of the said
acknowledgement to the AMCs with which you are empanelled.

PAYING FOR ADVICE

Traditionally IFAs have relied upon commission paid by product providers to pay for their
services. In recent years there has been a shift towards fee based advice as this is
perceived as fairer toward the client. However , due to under capitalization in the advice
sector and consumer reluctance to pay for something they perceived as getting for fee,
the transition to fee based advice has been slow and concentrated in the high net worth
sector.
To encourage clients awareness of the cost of advice, and to stimulate a market in
advice, the FSA has introduced a new disclosures regime for advisers giving regulated
investment advice. Since July 2005this regime insist that advisers who market
themselves as independent must offer the option of paying a fee for advice. The three
main remuneration option available are as follows.

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  Commission: Traditionally the most common way to pay for advice is for the IFA
to receive a commission from the product provider. The amount of commission
must be disclosed, and some IFAs will rebate a portion of their commission,
particularly in Execution –Only cases. The amount of commission and whether it
is deducted from the amount you actually invest or is included in the cost of the
investment varies from product to product. The client pays commission from
product charges so it does not represent free advice.
 Fees: less common than commission, all IFAs must offer the option of working
fee. Depending on the size and type of the investment, and the complexity of the
advice, this can work out cheaper than paying commission. Paying a fee for
advice is the best way to ensure that the advice is impartial and there is no
incentive for the IFAs to recommend a product solution.
 Combination: it is also possible to pay a combination of fees and commission .in
this situation the IFAs will rebate a proportion of the commission they would
have been in a commission only scenario.
there are strict requirement for the type and amount of payment to IFAs to be clearly
disclosed, so it would normally be quite easy to determine the cheapest option for a
particular investment

NO ENTRY LOAD ON MUTUAL FUND

Much have been said and discussed about the recent SEBI circular allowing direct
investments by mutual funds investors without any entry load. There have been voices
of opinion from all concerned and much heat has been generated about the SEBI move.
It is time that one looked at the issue in a dispassionate manner to decipher the object of
the circular, its benefits and its likely impact on the various stake holder. It would also be
my endeavor to offer any suggestions to strengthen the process further.

To start with ,let`s examine why SEBI moved to allow investors to invest directly without
paying the requisite entry load that is applicable in case the application is routed through
a distributor . for some time now ,there have been mounting complaints of blatant mis-
selling and portfolio churn happening in mutual fund distribution. In many quarter of the
market, mutual funds are apparently sold not on the basis of the investors need and
requirement but on the basis of commission being paid. Again investors have been
complaining of poor or virtually no services being rendered by some distributor leading to

20
an unhappy feeling amongst a section of investors. While these issues are serious and
warrant the regulators attention, they are not different than similar problems being faced
by customers on the banking or insurances side of the business.
Now let`s turn some of the likely benefits that may be derived from this regulatory
action. The primary benefit that accrues from this move is that some investors stand
benefit from the savings in upfront load of 2.25% on their investment. since all close–end
funds are typically no load schemes, it would be open end funds that are primarily in
contention. It would be difficult to quantify the likely amount that investors may save but
one suspects that the amount may not be materially significant.

AMFI GUIDELINS FOR IFAs

Mutual funds are emerging as an important financial intermediary for the investing public
in India. Conceptually and operationally they are different. The investors need to
understand the working of a mutual fund and the increasingly diverse and complex
investment option brought to them by a large number of investors all over the country is
the network of INTERMEDIARIES/DISTRIBUTORS.

The intermediaries / distributors have to take on the role of financial advisors to

investors, a role for which they need preparation. AMFI Mutual Fund Certification and
Registration Programmed has been put together to give the fund distributors the
knowledge and insight required for them to become both better intermediaries and more
informed mutual fund advisors. Even mutual fund employees need to understand the
complexities of how the funds function internally and externally.

Certification is mandatory
The securities and Exchange Board of India(SEBI) has made mandatory for any entity/
person engaged in marketing and selling of mutual fund products to pass AMFI
certification test(Advisor module) and to obtain registration number from AMFI. Firms
and corporate distribution engaged in selling and marketing of mutual fund products
have to pass the AMFI certification test (Advisors Module) and obtain registration with
AMFI before canvassing business of mutual funds.

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INTRODUCTION
The circular no MFD/CIR/20/2320/2002 dated November 28,2002, issued by SEBI on
the captioned subject has prescribed the parameters for ensuring compliance with their
earlier circular No MFD/CIR/06/210/2002 dated June 26,2002 and has stated that:

“all mutual fund and intermediaries ar advised to follow it strictly and should not indulge
in any practice contravening it directly or indirectly ie.paying commission or by allotting
intermediary codes to investors or their associates for paying them commission on their
own investment, etc”
It has therefore advised AMFI to formulate specific guidelines and modalities within
these parameters, in consultation with SEBI assist AMCs in following the code in letter
and spirit. As such these guidelines are mandatory .Mutual fund are required to ensures
compliance with these guidelines ,both by intermediaries distributing their product , and
through them, sub brokers acting on behalf of such intermediaries.
These guidelines have issued in terms of SEBI circulation No.MFD/CIR/20/2320/2002
dated November 28, 2002 read with SEBI circular No MFD/CIR/06/210/2002 dated June
26, 2002 with the primary objective of ensuring compliance by the mutual fund so that
they do not use any unethical mean to sell , market or induce any investor to buy units of
their scheme(s) and shall mobilized funds on the strength of professional fund
management and good practices.
Definitions & guidelines for Interpreting them
ARN: means AMFI registration number allotted by AMFI
ARMFA: means an intermediary who is registered with AMFI and stands for AMFI
registered Mutual fund Advisors.
BROKERAGE: Shall include all amounts paid to intermediary forbs selling the product of
the mutual fund and shall include commissions on sale of mutual funds, incentives,
consulting fees, contest awards that have monetary value, gift, and lump sum payment.
INTERMEDIARY: shall mean all person or entities involved in selling and distribution of
mutual fund products including inter alia brokers, sub –brokers, sole proprietor firms
,consultants, financial advisors, channel partner partnership firms ,companies or called
by any other names, but shall not include collection ceters, where there is no element of

22
advice , and it is only a counter for making forms available and collecting completed
applications. While such collection centers need not obtain ARN ,they would have to
abide by the code of conduct, to the extent applicable and specifically with regard of to
the clause on rebating.
INVESTOR: Any person or entity holding units under any scheme(s) of a mutual fund.
PRINCIPAL INTERMEDIARY: any intermediary who pay s such brokerage or
consideration to a sub broker as defined below, shall be called the principal intermediary
for the purposes of these guidelines , and with references to the sub broker(s)
REBATE: Any amount paid by a mutual fund or an intermediary to an investor, on
account of any investment made by the investor in a mutual fund. Such payment shall
include payment made in the nature of Brokerage as defined above.
SUB BROKER: shall mean all person or entities, selling mutual funds units, but
obtaining brokerage or other considerations through Principal intermediary. All provision
of this guideline shall apply mutatis mutandis to such an intermediary, except where
otherwise stated.
It is clarified that the term Holding company and Subsidiary company used in this
guidelines shall have meaning respectively assigned to them in section4 0f the
companies act,1956.

1.Registration of intermediary with AMFI

1.1 the SEBI circular has made registration of intermediaries compulsory. this would
mean that no person or any other entity would be entitled to sell units of mutual fund
unless the intermediary is registered with AMFI. AMFI has made the provision for issuing
an AMFI Registration number (ARN) and photo identity card for intermediaries. all
mutual fund shall stop empanelling Intermediaries who are not registered with AMFI
with effect from the date of these guidelines.

1.2 For Intermediaries already empanelled with mutual fund, being registered with AMFI
shall become compulsory by March 31, 2003. Thereafter, no brokerage can be paid out
to intermediaries who are not registered.

23
1.3 All corporate Intermediaries shall ensures that employees engaged in sales and
marketing of mutual fund are registered with AMFI and have obtained a photo identity
card.

1.4 AMFI certification is the sole criteria for allotting an ARN to an individual
Intermediary, other than those specifically exempted, who shall follow the procedure
detailed in 2.12 below. Corporate intermediaries can obtain an ARN by undertaking to
ensures that all personnel; engaged in sales and marketing pass the AMFI certification
test and register with AMFI and obtain a photo identity, with their corporate ARN ,by
March 31, 2003 in the case of existing Intermediaries and their existing employees.

1.5 for corporate intermediary entering the business of mutual fund sales after the date
of these guidelines, and for persons hired by existing intermediaries, all such employees
proposed to be engaged in the sales and marketing of mutual funds, shall have to
register with AMFI. In the case of a fresh corporate entrant to the intermediation industry,
this would mean that despite obtaining an ARN it would not be able to do business till
the first employee recruited for sales /marketing /holds AMFI certification and all
subsequent employees recruited for engaging in sales/marketing are also registered with
AMFI and have obtained his/her photo identity card.

2 Procedure for obtaining registration:

AMFI has currently authorized M/S Computer Age Management Services Pvt
Ltd.(“CAMS”) to act as processing agent on its behalf. AMFI may, from time to time,
authorize other organizations to undertake the task currently assigned only to CAMS.

Intermediaries are requested to apply in the prescribed form (sample enclosed) which
can be obtained from the website of or office of AMFI and website or any office of CAMS
and can also be kept at the branch offices of member for the convenience of their
distributors. In addition distributor may write to AMFI or CAMS and obtain the application
form by post.

24
Application forms can be submitted at the office of CAMS. Annexure I contains a list of
offices of CAMS.

FOR INDIVIDUAL APPLICANTS

 An individual must complete the appropriate form and enclose a photograph of
the size defined in the application form ,and a self attested copy of either the
AMFI certificate or marks sheet as proof of having passed the AMFI Certification
Test.
 The SEBI circular under references has exempted senior citizens, i.e. individual
who have completed 60 years of age as on March 31, 2003. such applicant shall
enclose proof of age and a recommendation from a member AMC(s) ,certifying
that he/ she has worked for 2 years as an intermediary and has canvassed a
minimum business of Rs 200,000 over a period of the last 2 year.
 The prescribed fees can be paid either by a demand draft or by a local cheque in
favour of the “Association of Mutual fund in India “payable at the location of the
CAMS office to wich the form is submitted. The prescribed fees are as under:
-- for individual Intermediaries as well as for each employee of a corporate
intermediary, the prescribed fee are Rs 500/(which may be amended from time to
time by AMFI ).this fee has to be paid every time the individual renews his/her
registration.
FOR NON INDIVIDUAL APPLICANT
 Non individual applicants shall submit the form duly completed along with
memorandum and articles of association in the case of companies, partnership
firm, society registration document in the case of societies and trust deed iin the
case of trusts. The list of authorized signatories shall also be submitted.
 The prescribed fees in the case of public limited companies are Rs 15,000/- and
in the case of other are Rs 1000/- The non individual applicant must however
ensure that each employee engaged in sales or marketing has applied for and
obtained a photo identity card on or before March 31,2003.
 After March 31, 2003, no employee of an intermediary can engage in the sales
and marketing of mutual fund products unless he/she has obtained a photo
identity card.

25
The document shall be scrutinized and if found in order and if the prescribed fees have
been realized ,a certificate of registration or photo identity card as applicable shall be
issued. These will be mailed directly to the applicant.

3. EMPLANELLMENT CRITERIA(ARMFA with AMC`S as Principal Intermediaries as

Sub brokers)

To ensure that only genuine distributor are eligible for brokerage , a set of common
minimum criteria are evolved for the purpose of due diligence before empanelling (and
thereafter for the payment of brokerage) an ARMFA by an AMC or by a principal
Intermediary as a sub broker.
All intermediaries fulfilling the empanelment criteria as provided here under shall be
entitled to receive brokerage for all business canvassed by by them ,except on their
own investment made by the sponsor of a mutual fund in the scheme of the mutual fund
sponsored by them.
The following are the common minimum criteria:

3.1 all individual ARMFA obtaining empanelment with an AMC would be required to
have at least 12 investors with the empanelling AMC ,within one year from the date of
this circular . failing this ,the ARMFA would have to provide an undertaking to the AMC
that it services at least 25 investor across all mutual fund . failing both the above , the
ARMFA would not be entitled to receive brokerage from the AMC on the mobilization
done by it during the subsequent year ,until it complies with the above.

3.2 corporate ARMFA obtaining empanelment with an AMC would be required to have at
least 100 investors from non associates as defined here in, within one year of
empanelment or in the case of ARMFA already empanelled, with in one year from the
date of circular or

3.3 would have average assets under management of at least Rs 1 crore with the
empanelling AMC, which are not from associates (being subsidiary and holding
companies) within the period stipulated in 3.2 above.

26
3.4 During a twelve month period after empanelment,if 75% or more of the gross funds
mobilized for the empanelling AMC by a corporate ARMFA ,is from associate, the
ARMFA would be required to provide a certificate signed by the authorized person, that
it services at least 200 investors, other than associates and/or employees of associates,
during the said period.

3.5ARMFAs are empanelled at different point of time. Monitoring on an on going basis

from the date of empanelment would be administratively inconvenient. Therefore
following empanelment of an ARMFA, the AMC would be required to monitor compliance
of the criteria in 3.1 to 3.4 during the quarter after completion of 12 month of
empanelment. Thereafter monitoring of compliance with the criteria shall be done at the
end of every 12 month period following the previous verification of compliance.

4 SELF-CERTIFICATION FOR THE PURPOSE OF COMPLIANCE:(by ARMFA to

AMCS and by sub brokers to principal intermediaries)

The compliance with the SEBI circulars under references and these guidelines will be
through a process of self regulation. Unless otherwise stated, all these guidelines would
be applicable both to ARMFA empanelled with AMCs and to sub-brokers of Principal
intermediaries;

4.1 For the purpose of empanelment, a corporate ARMFA would have to provide a letter
from the chairman/Managing Director/CEO/authorized persons confirming that the
organation was authorized to undertake distribution of mutual funds.

4.2 After the close of the current financial year (on March 31, 2003), AMCs would be
required to obtain a one time certificate from the corporate ARMFA and other non
individual ARMFA (structured sole proprietor firms, partnership firm socrusts,co co
operative etc) empanelled with them, containing their ARN and certifying that as on on
March 31,2003 all employees engaged in sales or marketing have obtained or applied
for AMFI registration and obtaining their photo identity card.

27
4.3 AMCs (or Registrars on behalf of AMCs) would obtain once a year , a certificate from
empanelled intermediaries as to their having complied with these guidelines and the
code of conduct.

4.4 Similarly Principal intermediaries would be required to obtain a certificate from their
sub brokers

4.5 The wording of the said certificate would be

“This is to certify that ,in the course of my /our business in the distribution of mutual fund
products during the financial year ended March 31……………. I/we have adhered to the
code of conduct contained in SEBI circular no.MFD/CIR/06/210/2002 dated June
26,2002 and to the requirement as prescribed in SEBIs subsequent circular no
MFD/CIR/20/23230/2002 dated November28 ,2002 and the AMFI circular no CIR/ARN/-
01-02-03 dated January 15,2003 in this regard”

In case of non compliance with the code of conduct and these guidelines by the
intermediary, the empanelling AMC would be required to suspend payout of brokerage
until the requirement is met. Suspend payments may be shown as an outstanding by the
mutual fund until such time as the intermediary complies with the requirement.

5. DISCLAIMER:
All original and/or first application forms for mutual funds shall contain a disclaimer to be
signed by the investor. This undertaking/disclaimer by investor would read as under:
“I/we have understood the details of the scheme and I/ we have not received nor been
included by any rebate or gifts, directly or indirectly, in making this investment”

6. GENERATING AWARENESS
AMFI and its members would undertake to advertise and generate awareness about the
code of conduct so as to make intermediaries and investors aware of the implications of
the same.
AMCs are required to inform all intermediaries empanelled with them, in writing,
forwarding ,the SEBI circular under references and the requirement of these guidelines
at the earliest.

NATIONAL INSTITUTE OF SECURITIES MARKET

28
In pursuance of the announcement made by the Finance Minister in his Budget Speech
in February 2005, Securities and Exchange Board of India (SEBI) has established the
National Institute of Securities Markets (NISM) in Mumbai. SEBI, by establishing NISM,
has articulated the desire expressed by the Indian government to promote securities
market education and research. Towards accomplishing the desire of Government of
India and vision of SEBI, NISM has launched an effort to deliver financial and
securities education at various levels and across various segments in India and abroad.
To implement its objectives, NISM has established six distinct schools to cater the
educational needs of various constituencies such as investor, issuers, intermediaries,
regulatory staff, policy makers, academia and future professionals of securities markets.
NISM brings out various publications on securities markets with a view to enhance
knowledge levels of participants in the securities industry.NISM is mandated to
implement certification examinations for professionals employed in various segments of
the Indian securities markets.
About the Certification Examination for Mutual Fund Distributors

The examination seeks to create a common minimum knowledge benchmark for all
persons involved in selling and distributing mutual funds including:
• Individual Mutual Fund Distributors
• Employees of organizations engaged in sales and Distribution of Mutual Funds
• Employees of Asset Management Companies specially persons engaged in sales and
distribution of Mutual Funds .The certification aims to enhance the quality of sales,
distribution and related support services in the mutual fund industry.
Examination Objectives
On successful completion of the examination, the candidate should:
• Know the basics of mutual funds, their role and structure, different kinds of mutual fund
schemes and their features
• Understand how mutual funds are distributed in the marketplace, how schemes are to
be evaluated, and how suitable products and services can be recommended to investors
and prospective investors in the market.
• Get oriented to the legalities, accounting, valuation and taxation aspects underlying
mutual funds and their distribution.

29
• Get acquainted with financial planning as an approach to investing in mutual funds, and
an aid for advisors to develop long term relationships with their clients.

Assessment Structure
The examination consists of 100 questions of 1 mark each and should be completed in 2
hours. The passing score for the examination is 50%. There shall be negative marking of
25% of the marks assigned to a question.

Candidates who wish to appear for the Mutual Fund Distributors Certification
Examination can click here ONLINE Registration. They can register/pay fees/enroll for
the test online.

For more information on NISM and the NISM-Series-V-A: Mutual Fund Distributors
Certification Examination click here.

Test Details

Pass Certificate #
Sr. Fees Test Duration No. of Maximum
Name of Module Marks* Validity (in
No. (Rs.) (in minutes) Questions Marks
(%) years)

NISM-Series-V-A: Mutual
1 Fund Distributors 1000 120 100 100 50 3
Certification Examination

* Negative marking – 25% of the marks assigned to the question.

# Passing Certificate will be issued only to those candidates who have furnished/ updated their
Income Tax Permanent Account Number (PAN) in their registration details .

Top

PAYMENT
REGISTRATION* STUDY MATERIAL ENROLLMENT***
MODE **

Site address : www.nseindia.com Credit card / Workbook is available Date of test can be
ONLINE
Home>NCFM>Online Register / Debit card under selected online

30
 Enroll Or Home>NCFM>NISM Cash / Home>NCFM>NISM
Certifications Netbanking certifications.

Site address : www.nseindia.com

Workbook is available Date of test can be
Registration form can be Demand
under specified in the form
OFFLINE downloaded from Draft/ Pay
Home>NCFM>NISM or can also be
Home>NCFM>Procedures – Order only
certifications. selected online
Offline registration.

* Registration is one time activity (should be done only once) and Regn. No. is valid for life time.
Thus, candidates may carefully maintain 'user id', 'pass word' (set by them during registration)
and NCFM registration no. generated by NCFM system. Candidate may access his/her NCFM
account online anytime by putting such 'user id' & 'pass word' on Login page (under nseindia.com
> NCFM> Online Register / Enroll).

** All payments made are valid for a period of 180 days from date of receipt of payment.

*** Enrollment implies booking a seat for specific module, test date, test centre.

Points to be noted :

 Certificates shall be issued only to those successful candidates who have

provided their Permanent Account Number (PAN) details at the time of
registration. The original PAN card needs to be produced as a means of
identification for the test.

 In case candidates do not furnish the Permanent Account Number (PAN) details
at the time of registration, they can still take the test. Candidates not providing
Permanent Account Number (PAN) details, will be given score card only. In case
such candidates wish to obtain a certificate, the same will be issued only after
receipt of Permanent Account Number (PAN) number information and
verification.

 In case a candidate is already registered with NCFM and wishes to take the
NISM-Series-I: Currency Derivatives Certification Examination, NISM-
Series-II-A: Registrars to an Issue and Share Transfer Agents – Corporate
Certification Examination OR NISM-Series-II-B: Registrars to an Issue and

31
 Share Transfer Agents – Mutual Fund Certification Examination and obtain a
certificate for the same, he needs to update his registration details before making
payment or enrolling for the test. The additional registration details and
Permanent Account Number (PAN) number related information can be updated
either
- ONLINE by accessing the link 'Edit Profile' or
- OFFLINE by furnishing the said details in the registration form which can be
downloaded from the NSE website.

 As per SEBI requirement, all approved users and sales personnel of trading
members of currency derivatives segments of recognised stock exchanges are
required to obtain the necessary certification in NISM-Series-I: Currency
Derivatives Certification Examination by September 30, 2009. Further, as per
NISM notification (NISM/Certification/Series-I: CD/2009/2 dated May 12, 2009),
all approved users and sales personnel of trading members of currency
derivatives segments of recognised stock exchanges who have passed the
FEDAI–NSE Currency Futures (Basic) Module offered by NSE till 14-May-2009,
shall be deemed to have obtained the requisite standards.

FUNCTION OF IFAs
The first function of IFAs is financial planning .it denotes the process of determining
whether and how an individual can meet life goals through the proper management of
financial resources. Financial planning integrates the financial planning process with the
financial planning object area.
The following are the important steps in the process of financial planning.

FINANCIAL PLANNING PROCESS

32
 Establishing and define the relationship with the client


Define client’s goal


Understand ability to save and need for cash flows


Understand the risk tolerance of clients


Understand the tax liability and requirement of clients


Create asset allocation plant


Enabling actual investment


Review and rebalancing

a. Establish and define the relationship with the clients: This involves
understanding the various aspects of the relationship in terms of role , obligation
and responsibilities of clients and the advisors.
b. Define clients goal: This involve ascertaining specific goals, their timing and the
funding requirement of each goal of the client.

33
 c. Understanding ability to save and need for cash flows: This involve
understanding the actual saving and spending habits of client, and ascertaining
the propensity to invest and liquidity requirement for the future.
d. Understand the risk tolerance of clients: investor ability to choose and use
financial products depends on their preferences and attitude towards risk. A
product that suit the given goal of the client, may be unsuitable given his risk
appetite.
e. Understand the tax liability and requirement of clients: Choice of financial
products can significantly vary depending on the tax status of the clients and the
post tax income generated by the investment.
f. Create asset allocation plan: This is the tailor made portfolio for the client,
which seeks to enable the achievement of the stated financial goals.
g. Enabling actual investment: This involves the processing aspects of creating
an investment port folio, by enabling clients to buy into chosen investment
products.
h. Review and rebalancing: The tailor made portfolio has to be periodically
reviewed for its performance, suitability to financial goals, and revised for any
changes in investor requirement or preferences.

Rules to improve investor’s financial future

Investors are the biggest asset that an IFAs have. To recommend a product to the
investors the best way to start is to design an investment plan that suits the investors
need and monitor the same. An IFAs can achieve its target and can improve the
financial future of investors by following these lessons.

a. Harness the power of compounding : it is simple principle of finance , that

growth in investment can be rapid if proceeds are re invested. If interest incomes
are re- invested and allowed to earn at the same rates for the investor, the
returned are enhanced over a period of time. This is technically called
compounding.
b. Start early : In order to reach pre-specified financial goal, investors will have
to determine the amount they can save and the period over which these
investments should grow to enable them to meet the financial goal. Investors

34
 who start early can have comfortable saving plans with lower outlays , and
choose safer investment option whose return are low to moderate. Investor who
begin late , will have to invest higher amounts, and choose higher return-higher
risk instrument ,to reach the same financial goals.
c. Realistic expectation: for a realistic expectation IFAs have to compare the
performance of the portfolio with relevant benchmark indices and develop
realistic expectation. Expecting unreasonable returns will surely cause
disappointment leading to excessive risk taking.
d. Invest regularly: IFAs may be able to pursue financial plan that enable to save
smaller amount regularly, than lump sum amounts on ad hoc basis.
e. Asset allocation- Build a portfolio of investor that is diversified among different
types of investment according to the risk appetite. Because different sector of the
market move at different times in different patterns, asset allocation tends to
reduce the risk of huge losses and improve the chance of stable return.
f. Tax are important -but not that important: The primary goal of investing is
long term growth of money through sound investment decisions. Tax implication
are important, and one should always try to minimize taxes thereby maximizing
the after tax return. But putting taxes above all else can often lead to poor
decisions. For instance, people invest in insurance because it give tax stops. But
in the process they forgo opportunities of earning good return and end up
compromising on the achievement of their financial objective.

SELECTING A MUTUAL FUND

SELECTION PARAMETER

Objective: The first point to note before investing in a fund is to find out whether
objective of investor matches with the scheme. It is necessary, as any conflict would
directly affect the prospective returns. For example, a scheme that invest heavily in mid

35
cap stocks is not suited for a conservative equity investor. He should be better off in a
scheme, which invests mainly in blue chips.

Risk capacity and capability: This dictates the choice of schemes. Those with no risk
tolerance should go for debt schemes, as they are relatively safer. Aggressive investors
can go for equity investments. Investors that are even more aggressive can try schemes
that invest in specific industry pr sectors.

Fund Manager’s and scheme track record: it is essential that the fund house you
choose has excellent track record. The fund manager should be professional and
maintain high transparency in operations. Look at the performance of the scheme
against relevant market benchmarks and its competitors. Look at the performance of a
longer period, as it will give how the scheme fared in different market condition
Cost factor: Though the AMC fee is regulated, IFAs should look at the expense ratio of
the fund before investing. This is because money is deducted from investment. A higher
entry load or exit load also will eat into returns. A higher expense ratio can be justified
only by superlative returns. It is very crucial in a debt fund, as it will devour a few
percentages from modest return.

BENEFIT OF BECOMING IFAs

Following are the benefit of IFAs
a. IFAs are able to recommend financial products, not merely based on the
products, but based on their suitability to investor needs. Investors value such
professional advice and the ability of IFAs to create tailor-made solution for
them.

36
 b. IFAs are able to build on their professional advice to investors and build long
term relationship with investors. Investors seeking advice on financial product
provide IFAs with information about their need and goals, as well as their
habits and preferences. These relationship, when nurtured well, can be
rewarding and long term in nature.
c. IFAs can build their business based on their professional expertise in
enabling investors to meet their financial goals, rather than merely lean on
the merits of financial products that they recommended. They are thus able to
profit from this expertise and value addition that they provide to investors..
d. IFAs can build reputation capital over time, as satisfied investors
recommended them too many others. Over time, they can emerge as
intermediaries on whom both issuers of financial products and investors rely
on ,for professional advice.

NEW MOVE BY AMFI FOR IFAs

Amfi to revive plans to start a fund
trading online platform, front-end portal
Association of Mutual Funds in India (Amfi) is reviving an earlier proposal to launch an
online platform which will help distributors and financial advisors transact mutual fund
schemes across sales channels. The "front-end" portal will link the stock exchange fund
platforms and also enable investors to buy or sell schemes directly from any of the
registered 41 mutual funds, according to fund industry sources.

By planning to link the proposed portal with exchange platforms, the mutual fund
industry body is trying to bypass stock brokers, who are not keen to sell mutual funds,
industry sources said. The wire-frame platform is expected to be functional in six
months, the sources said.

Initially, Amfi will ask independent financial advisors (IFAs) and other Amfi registration
holders to get empanelled on the online platform. The industry body is yet to work out on
aspects such as portal membership fees and site ownership, which are expected to be

37
discussed at the board meeting next week.

"We've plans to start a fund platform, but it's too premature to talk about it now," said V
Ramesh, deputy chief executive of Amfi, adding, "It's going to be a non-profit venture.
We expect to keep transaction costs at a lower base."

The Amfi platform will help IFAs either transact through the exchanges or link up with
fund houses directly. IFAs continue to contribute in a big way to mutual fund sales.
According to data from registrars CAMS and Karvy, 45% of equity fund sales were done
through independent financial advisors compared to 29% by banks in 2010 -11.

Capital market regulator Sebi, post-entry load ban in 2009, had asked Amfi to design a
common fund platform which will allow retail investors to transact, switch over and
compare the schemes online through a single window. While Amfi was working on the
platform, Singapore-based Ifast Financial launched fundsupermart.com and registrars
CAMS and Karvy jointly launched their fund platform 'Finnet'. Chennai-based Wealth
India Financial Services also launched fundsindia.com at around this time.

But private online fund portals are yet to take off as expected, with most of them logging
just about 200 - 400 transactions daily. "Net-based transactions will take time to be
popular among retail investors. We need Amfi-like models to make the channel popular,"
said Rajesh Krishnamoorthy, managing director of Ifast Financial. "It'll take 3 - 6 years
for any online distribution model to turn profitable," Mr Krishnamoorthy said.

The stock exchange platforms BSE Star MF and NSE MFSS, which started in December
2010, are hardly seeing volumes because of broker apathy. For stock brokers, selling
mutual funds is not profitable in the absence of volumes. The BSE on an average logs
about 193 buy or sell orders worth about 1.79 crore every month while the NSE
executes about half the number of trade orders worth about 70 lakh.

Stock brokers get about 0.5% as commission for executing fund trades on behalf of
investors. The BSE, according to officials, has 180 empanelled brokers. Out of which,
about only 50 are brokering funds.

38
Panel proposes 'transaction fee' of Rs 100 on
fresh mutual fund investments, SEBI backs
token charge
A panel formed to revive the fortunes of the mutual fund industry has proposed a fixed
'transaction fee' on fresh mutual fund investments , which may still fail to incentivise
distributors, but has the potential to be dubbed as revival of 'entry load' with a different
name.

The committee headed by Prashant Saran , member of the board at the markets
regulator, last week nearly concluded that a Rs 100 transaction fee could be imposed on
investors for every new investment that will help distributors cover costs. It also
proposed a 'tied agent' concept, which would exclusively market products of one mutual
fund.

The proposal need not necessarily be accepted by the Securities & Exchange
Board of India (Sebi), whose chairman UK Sinha has ruled out rolling back the ban on
entry loads imposed by his predecessor CB Bhave . "The committee turned down
industry body Association of Mutual Funds in India's suggestion to reintroduce entry
loads on specific funds," said a person privy to the discussions. "Entry load was no
longer an option."

Mutual funds and the regulator are working to revive the industry which has been on the
slide ever since Bhave banned in 2009 the socalled entry loads that were paid to
distributors from investors' corpus. Share of equity schemes has fallen to just about a
quarter of overall assets of about Rs 7 lakh crore, from as high as 35% in 2007. The
number of candidates seeking to qualify as mutual fund distributors has fallen to 6,500 in
April-June 2010, from 17,132 in July-September 2008.

"How is it investor-friendly?" asked the research head of a rating company who did not
want to be identified. "If an investor is applying for a systematic investment plan (SIP) of
Rs 1,000, he's paying Rs 100, or 10% of his investment, as transaction charge. This is
much more than the earlier entry load of 2.5%." It will be illogical to implement blanket
transaction fee, distributors told ET. Some independent financial advisors do not expect
the planned levy to help mutual funds penetrate the countryside.

39
In the initial phase, the transaction fee will be only for agents catering to middle and
lower-income investors. To prevent distributor-induced portfolio churning, the committee
has limited the number of transactions in a SIP folio to six per year. "The Rs 100 given
as transaction charge will not bring back distributors who have stopped selling funds.
There is no incentive for selling large SIPs," said Anil Londhe, a Nagpurbased
independent financial advisor. "If Sebi is introducing transaction fee, it should be
proportionate to the investment made by the investor. They should make it a percentage
of the money invested
Only then will it cover servicing costs incurred by fund advisors." Fund sellers get trail
fees, an annual payment by the fund company to the distributor if the investor remains
invested, in a discretionary manner. While large distributors get 80-100 basis points,
smaller distributors get only 30-60 basis points as trail fees. "Transaction fee has to
cover overall costs incurred by independent financial advisors (IFAs)... Quality IFAs
advise clients, give out reports and rebalance portfolios. They (IFAs) have to be
remunerated for all their services. This will not be covered by an additional Rs 100,
received as transaction fee," Londhe said. IFAs continue to contribute in a big way to
mutual fund sales.

40
 CHAPTER-3 IFAs IN UTI
3.1 Opportunity to IFAs in UTI
3.2 What makes a unique UTI IFAs
3.3 Benefit, reward and recognition for IFAs
3.4 Communication to IFAs

IFAs in UTI
IFAs profession is a challenging profession. It has proved to be beneficial as compared
to the traditional business. UTI MF provide a wider platform to IFAs to learn , grow and
succeed. They can grow unlimited with the opportunities available and the support at all
levels they get with UTI. UTI respect the persistent effort put by IFAs and run various

41
motivational programmed. IIMS Data works IFA survey (conducted with a sample of
1497 AMFI certified across India’s 7 largest metros from 21 states) has recognized UTI
AMC to be No 1 rank holder under the categories.
1) Best training / IFA SERVICE
2) Best commission structure
3) Best incentives
Commission at UTI
 Upfront commission @ 1%
 Trial commission is @0.75% for the first year and 0.40% from second
year onward and also considering 10% of the existing investors redeem
their investment.

UTI IFA- THE OPPORTUNITY

Following opportunity are provided to IFAs in UTI.

 Unlimited Earning Potential
 No investment required
 Free Training from UTI Mutual fund
 Sales support from UTI Mutual fund
 Fulfilling work environment
 Work at your convenience
 Build your existing investors base

What make an exceptional UTI IFA

Following qualities make UTI IFAs different from other
 Entrepreneurial in nature
 Motivated to meet the goal set
 Caring and helping
 Possess the desire to help others

42
 Project a genuine sense of caring
 Have a passion for learning
 Honest & has the commitment to conduct every business transaction characterized
by integrity & truth

Benefit of being in UTI family

In UTI family IFAs with their strength of contacts, can build their own credentials and
may become Chief Representative or Relationship Manager or even a Chief Manager.

Insurance for IFAs

All ARN holders who will be mobilizing business consistently every month for one year
(12 month starting with any of the month of starting period) will be awarded –
 A self Mediclaim Policy of insurance cover of Rs one lakh for one year.
 In addition to the above a Personal Accident for sum insured of Rs 1 lakh for one
year.
Mediclaim policy of insurance cover will be Rs 2 lakh and Rs 3 lakh for the ARN holders
who will be mobilizing business consecutively every month and will maintain Net sales of
Rs 25 lakhs and Rs 50 lakhs & above respectively.

REWARDS AND RECOGNITION FOR IFAs

following are the important reward and recognition for the IFAs in UTI.
1. Chairman club : The club membership is at the India basis and on the basis of
several criteria e.g. equity sales ,debt sales ,no. of application the winner are
choosen. Winner are provided treat of 2 nights and 3 days either in India or
abroad. A total of 100 chairman’s club membership is chosen out of 40,000 IFAs.
2. Star club: The club membership is on the regional basis. UTI MF has 10 region
namely Delhi, Mumbai, kolkata, Bangalore, Ahmedabad, Gujrat, Chandigarh,
Lucknow & Guwahati.
3. Contest during various product campaign: On a regular basis UTI conduct
contests which involve the chances of winning various tangible goods such as
Gold coins, Silver Coins, Air conditioner etc and also tours to outside India.

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 Recently launched contest by UTI qualified the successful IFAs for overseas
trips.
(a) Bali -70 IFAs (b) Sydney- 174 IFAs (c) Thailand- 269 IFAs
(d) West Indies-28 IFAs (e) Egypt-353 IFAs (f) Malaysia-269 IFAs
(g) Paris-612 IFAs (h) Dubai-175 IFAs (i) Tashkent-380 IFAs
4. Medical Insurance to Chairman’s Club Member: UTI MF provides insurances
to the chairman’s club member and their family. Family include self ,spouse and two
dependent children(1+3) for 3 lakh cover. This is valid for one year for the chairman’s
club member and his/her spouse and two dependent children from the date of issue
of insurance.

COMMUNICATION TO IFAs IN UTI MF

To keep IFAs posted with the current affairs taking place in UTI MF along with the
same in the various sector of economy they communicate with periodical.
Market today
 Provide inside about equity and debt market changes for the day
 The fluctuation ,the reason, the best performing, the least performing
companies on intraday is available
 Sensex movement intraday, volumes of business etc. are available
UTI treasury watch
 Fortnightly issue
 Provide insight about Debt Market
 Latest changes in inflation etc. over last fortnight
 Gily market ,bonds ,forex mkt., Derivatives etc. discussed
UTI fund watch
 Monthly issues
 Provide the fund performance on a monthly basis
 All the fund are covered
 Hard and soft copy available on internet
UTI Advantage
 Monthly issue
 Provide detail about product for campaign
 Investment trends

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  Soft copy available on internet
UTI equity watch
 Monthly issue
 Provide insight about equity market
 Indices and their performance
 Indian Equity market, FIIs, FDIs, Inflows etc.
UTI Bandhan
 Quarterly issue
 For retail channel IFAs/CR/CA
 To share experiences
 To share the success and failures
UTI Smart choice
 Quarterly issue
 Discuss about focused fund offers
 Market update
 Fund manager’s views and reviews
SMS update
 BSE sensex
 Nifty
 UTI FTIF, UTI FMP update

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 CHAPTER-4
IFAs view about different AMCs

View’s of IFAs on different AMCs

To know the view’s of IFAs on different AMCs , I prepared a questionnaire and met with
them. They all are very co-operatives and share all the experience with me about
different AMCs. Following are the question asked by me:

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Q1. For how many AMCs do you work for?
Ans :…………………

Q2. What is the upfront commission given to you by different AMC?

Reliance MF HDFC MF ICICI Prudential MF Birla sun life MF UTI MF

A) 0.40—0.50 A) 0.40—0.50 A) 0.40—0.50 A) 0.40—0.50 A) 0.40—0.50

B) 0.50—0.60 B) 0.50-0—0.60 B) 0.50—0.60 B) 0.50—0.60 B) 0.50—0.60

C) 0.60—0.70 C) 0.60—0.70 C) 0.60—0.70 C) 0.60—0.70 C) 0.60—0.70

D) 0.70—0.80 D) 0.70—0.80 D) 0.70—0.80 D)0.70—0.80 D)0.70—0.80

Q3. What is the trail commission given to you by different AMC?

Reliance MF HDFC MF ICICI Prudential MF Birla sun life MF UTI MF

A) 0.50—0.60 A) 0.50—0.60 A) 0.50—0.60 A) 0.50—0.60 A) 0.50—0.60

B) 0.60—0.70 B) 0.60—0.70 B) 0.60—0.70 B) 0.60—0.70 B) 0.60—0.70

C) 0.70—0.80 C) 0.70—0.80 C) 0.70—0.80 C) 0.70—0.80 C) 0.70—0.80

D) 0.80—0.90 D) 0.80—0.90 D)0.80—0.90 D) 0.80—0.90 D) 0.80—0.90

Q4. Which AMC provide you opportunity to become a Relationship Manager or Chief Manager?

A) Reliance MF  B) HDFC MF  C) ICICI Prudential MF D) Birla sun life MF  E) UTI MF


Q5. Which AMC provide you life insurance and medical insurance facilities?

A) Reliance MF  B) HDFC MF  C) ICICI Prudential MF D) Birla sun life MF  E) UTI MF
Q6.Which AMC provide regular overseas trip?

A) Reliance MF  B) HDFC MF  C) ICICI PrudentialMF D) Birla sun life MF  E) UTI MF

Q7 Which AMC provides free training facilities?

A) Reliance MF  B) HDFC MF  C) ICICI Prudential MF D) Birla sun life MF  E) UTI MF 

Q8. Which AMC provide regular sales support f?
A) Reliance MF  B) HDFC MF  C) ICICI Prudential MF D) Birla sun life MF  E) UTI MF

Q9 Which AMC provides you better after sale services?
A) Reliance MF  B) HDFC MF  C) ICICI Prudential MF D) Birla sun life MF E) UTI MF 

Views of IFAs:
Commission: Regarding commission most of the IFAs say that it is the confidential
matter among IFAs and the AMCs .So they are not agree to say any thing on that
matter. Actually every AMCs segment the IFAs in different category according to their
performance. The IFAs get more commission who will perform smart business. Normally

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0.40-0.50 paise as upfront commission and 0.50-0.60 paise as trail commission is paid
to the IFAs who perform normal business.
Opportunity to become Relationship Manager or chief manager:
Regarding this most of the IFAs say that only UTI provide the opportunity to become a
Relationship manager or Chief manager in its organization.
Life Insurance & Medical Insurance : As far as life and medical insurance is concern
,IFAs say that if they continue to do normal business activity regularly every month then
the AMCs will provide them life insurance &medical insurance facilities. All most all the
AMCs provide such facilities.
Overseas Trip: Regarding overseas trip IFAs say that if they complete the target given
by the AMCs then the AMCs can give them overseas trip. Mostly UTI MF, HDFC,
Reliance, ICICI provide overseas trip.
Sales support : All most all the AMCs provide regular sales support.
After sale service: During conversation with IFAs , I saw that IFAs give more
importance to the after sale service provided by the AMCs. AMCs which provide better
after sale service they will sell more product of them. According to them Reliance MF,
HDFC,UTI MF, ICICI MF, are the better after sale service provider.
Training facilities : Regarding training IFAs say that all most all the AMCs give free
training facilities, so that they perform business their business effectively.
No investment: All the IFAs say that no investment are required to work with any
AMCs

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 CHAPTER-5
RECOMMENDATION AND SUGGESTION

RECOMMENDATION AND SUGGESTION

As we all know that UTI is the first AMC of the country which was established through an
act of Indian parliament in 1964. Today we find there is huge competition in the market.

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Private sector players both Indian and foreign are giving very tough competition to UTI
and today they are at the top position. During this project I came to know that IFAs are
the back bone of this industry. If any AMCs want to hold top position then they can’t
ignore IFAs. Actually IFAs are those people who search clients make financial plan for
them and the recommended suitable product
Typically an IFAs will conduct a detailed survey of their client financial position
,preferences and objective; this is sometimes knows as `fact find`.The IFAs will then
advise appropriate action to met the client objectives; and if necessary recommended a
suitable financial product to match the client need. Ideally, the financial advisors help the
client maintain the desired balance of investment income, capital gain and acceptable
level of risk by using proper asset allocation.
So we can say that if the AMCs have a good relation with IFAs , make available them
competitive products, make provision for various rewards ,recognition, benefit for IFAs,
paid good commission ,then they can lead the market easily.
Here it is important to mention that role of Relationship manager is also important. How
they talk with IFAs? How they act and react on IFAs? How they solve their problem? etc
.A Relationship manager must have excellent motivational and communicational skill. He
must be professionally, potentially sound.
As a marketing student I would like to give some suggestion to this AMC.
1. SOUND STRATEGY: As we know that UTI is the first AMC of the country but now
days it is at 3rd position. At this stage management should have to formulate sound
strategies so that they can counter the attack of competitors and can retain its top
position.
2. PRODUCT UNIQUENESS: The company should have to focus on product
uniqueness ie. they have to introduced such product which is quite unique and make
essential for IFAs to sale.
3. OPEN MORE UFCs: Right now we find that UTI have less branches (UFC)as
compared to other AMCs. So the company should have to focus on increasing the
number of branches, so that thy can discharge their service effectively and also help in
increasing its market share.
4. AFTER SALE SERVICES: Today we find after sale services are very key element of
marketing. it help in creating customer satisfaction. During conversation with IFAs I find
that most of the IFAs give importance to after sale services those AMCs which provide
better after sale services they sell most product of them. They said that they are happy

50
with the performance of UTI Nehru Place UFC because they they provide excellent
services to them. After sale services include
 Regular dispatch of various information bulletin of UTI
 Regular dispatch of financial statement of investors
 Regular payment of brokerage
 Immediate short out of IFAs and investors problem.
5. COMPETITIVE COMMISSION STRUCTURE: Today we find large number of AMC in
the market. So the company should have to pay commission different from their
competitors, so that they can lead in the market.
6. RAISE THE NUMBER OF IFAs: The Company should have to increase the number
of IFAs and have to provide better training to them, so that they can expand their market.
7. TAPPING THE UNTAPPED MARKET (RURAL MARKET): As we know India is a
land of village’s, a major portion of population resides in villages. Today we find that
most of the AMCs are still targeting the urban areas and people of high income group.
Although UTI is the first AMC, but still now it has not focused on rural areas. So in order
to expand market the company must have to tap the rural areas.
8. PORMOTION: Today we find that most of the common men have not more
knowledge about mutual fund. It is the responsibility of a marketing manager to make
mass aware about mutual fund and its benefit. Promotion can play a very instrumental
role here, actually there are various tool of promotion by which mass can be aware
about mutual fund and its benefits such as advertisement, personal selling, publicity,
sales promotion etc. Here the company must make fair mix of different component of
promotion which make easy for IFAs to sale the product. The company has to follow the
pull strategy which involves inducing investors to ask IFAs that they will invest in UTI.
Advertisement is more appropriate for this strategy.
8. FAIR MIX OF FINANCIAL AND NON FINANCIAL INCENTIVE: As we know UTI
provide various reward and recognition to their IFAs .The Company should must focus
on making a fair mix of financial and non financial incentive which will be helpful in
motivating the IFAs

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