BSE StAR Mutual Funds Platform.

NMF II platform of NSE has two versions one for trading members and one for distributors. All
trading members of the stock exchange who have registered with AMFI as Mutual Fund
Distributor and have signed up with the respective mutual fund can offer transactions through
this facility to their investors. The units can also be transacted on these platforms through
clearing members of the stock exchange. Depository participants can process redemption
requests only. The list of eligible schemes for transaction on these platforms are notified by
the respective mutual funds. These eligible schemes are not listed on the stock exchange.
Similarly, distributors having valid AMFI registration can seek limited purpose membership of
the Exchange to transact in Mutual Fund units only.

The stock exchanges only offer a transaction platform, but they do not replace the RTAs. Since
this is essentially an order routing system between the investors and the AMC, the exchanges
do not offer settlement guarantee. Responsibility for settlement is with the AMC. However,
the normal stock exchange redressal mechanism would be available to address any investor
complaints.

SEBI vide its circular dated February 26, 2020, has allowed the investors to directly access the
infrastructure of stock exchanges to purchase and redeem mutual fund units directly from the
mutual fund/asset management companies.

There is an element of convenience that is available for investors when they transact mutual
fund units on the stock exchange. This is because the entire system is seamless and the
investor is familiar with it. In case of stocks, the investor needs to enter their order details
either through their broker or online and these are routed to the stock exchange and then
executed. The same route is followed for mutual fund units where the investor is able to
transact seamlessly and get the units in their demat account.

One of the main features of this platform is that the distributor only handles the transactions
of the investor. The rest of the process, including the pay in and payout of money as well as
the units, takes place through the stock exchange infrastructure. This involves the clearing
corporation too.

The beneficial part of this entire system is that apart from the normal purchase and sale of
units there is also the facility of undertaking a SIP which is a very crucial way of investing for
investors. STP and SWP transactions apart from a switch are also possible on the stock
exchange. The ease of making the investment and the facility offered is also a reason why the
investor might find this an attractive route to invest.

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 6.3.3 MF Utilities

MF Utilities (MFU) is a transaction aggregating platform that connects investors, RTAs,

distributors, banks, AMCs and others. MFU facilitates the distributors with online access to
submit investor transactions. This platform provides them with a single point for time-
stamping of transactions, document submission, paperless transaction facility, and login
facility for their clients.

Investors who register on the MFU are allotted a Common Account Number (CAN) under
which all their mutual fund holdings are consolidated. Investors have to be KYC compliant to
register for a CAN. If an investor is not already KYC compliant, then the MFU will facilitate KYC
registration along with the allotment of ‘CAN’.

The MFU offers a Common Transaction Form to transact in multiple schemes across
participating mutual funds using a single form. The form can be submitted through a mutual
fund distributor or to neutral Points of Service (PoS) and others irrespective of the RTA
servicing the mutual fund. MFU offers multiple modes of payments for investment through
physical and electronic means. MFU allows a single payment for multiple subscriptions made
under a single form. The existing mutual fund holding is mapped to the CAN based on PAN,
holding pattern and other parameters. Investors may have multiple CANs based on the
combination of holdings and mode of holding. Investors can also request online access
through which they can submit transactions, view holdings and lodge and track complaints.
The bank and nomination details provided to the MFU at the time of registering for the CAN
will override the information provided in the folios.44

6.3.4 Computer-based and Mobile-based Apps offered by distributors

Apart from the above platforms and the websites of distributors, the transaction facilities are
now available on mobile devices –smartphones, feature phones, and tablet computers. This
makes it even more convenient than going to a website. These are through apps that are
created by distributors in order to facilitate investments for their clients. These multiple
channels make it easier for clients to transact in a simple manner.

6.3.5 Electronic platforms created by the AMCs

44Inorder to make it more convenient to the existing and future investors to transact and avail services while invested in
Mutual Funds SEBI has decided that the RTAs shall implement standardized practices, system interoperability amongst
various stakeholders to jointly develop a common industry wide platform that will deliver an integrated, harmonized,
elevated experience to the investors across the industry. AMCs and Depositories are advised to facilitate the RTAs for
development of the platform. (The platform is operational since 31st December 2021). Read more at:
https://www.sebi.gov.in/legal/circulars/jul-2021/circular-on-rta-inter-operable-platform-for-enhancing-investors-
experience-in-mutual-fund-transactions-service-requests_51395.html
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Apart from the above, various AMCs have also created their own facilities like web-based and
mobile-based applications that facilitate various transactions. Many AMCs also offer
transaction facilities through SMS and WhatsApp. When an investor uses these platforms
then they are dealing directly with the mutual fund.

6.3.6 New age investment platforms

The Indian investors have also seen the emergence of new-age investment platforms. These
are technology-based platforms that allow investors to invest in mutual funds apart from
other areas like stocks, bonds etc. One of the key features of these platforms is the simplicity
of investment without the hassle of too much paperwork plus its low cost. On many of these
platforms, investors can buy direct plans of mutual funds too. These are available both
through websites as well as apps so it also becomes simple to interact with. Examples of these
include Groww, Kuvera, Paytm money, Coin etc.

6.4 Pre-requisites to become Distributor of a Mutual Fund45

An Asset Management Company may appoint an individual, bank, non-banking finance
company or distribution company as a distributor. SEBI has mandated mutual fund
distributors, agents or any persons employed or to be employed in the sale and/or
distribution of mutual fund products, to have a valid certification from the National Institute
of Securities Markets (NISM) by passing NISM Series-V-A: Mutual Fund Distributors
Certification Examination.

In order to be eligible to sell or market mutual funds, the following are compulsory:

o Obtaining NISM Certification

o The individual needs to pass the NISM certification examination mandated by SEBI.

o For persons who have attained the age of 50 years or who have at least 10 years of
experience in the securities markets in the sale and/ or distribution of mutual fund
products as of May 31, 2010, can obtain the certification either by passing the NISM
certification examination or qualifying for Continuing Professional Education (CPE) by
obtaining such classroom credits as may be specified by NISM from time to time.46
o Know Your Distributor Requirements

As part of SEBI’s drive to streamline the distribution process of mutual fund products, AMFI
has introduced the KYD process to verify the correctness of the information provided in the

45 Candidates may read about, “become a mutual fund distributor’ at https://www.amfiindia.com/distributor-corner/become-

mutual-fund-distributor
46SEBI Gazette Notification Ref. No. LAD-NRO/GN/2010-11/09/6422 dated May 31, 2010.

http://www.nism.ac.in/nism18042016/index.php/circulars/173-sebi-notification-on-nism-series-v-a-mutual-fund-distributors-
dated-may-31-2010
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registration documents and to have verification of the ARN holders.47

The process consists of document verification and a bio-metric process.

− Self-attested copy of the PAN card and specific documents as proof of address to be
submitted along with application form at the CAMS-PoS (Computer Age Management
Services-Points of Service). The original documents have to be presented for verification.

− The bio-metric process consists of taking the impression of the index finger of the right
hand of the ARN holder. This is done at the PoS at the time of submission of documents
(both for new registrations and renewal of ARN). In case of non-individual distributors,the
bio-metric process will be conducted on specified authorized persons.

− An acknowledgement confirming the completion of KYD process is received from the

CAMS-PoS.

− The existing ARN holders have to send the photocopy of the acknowledgement to all the
AMCs with whom they are empaneled.

o Obtaining AMFI Registration Number

After obtaining the certification and completing KYD requirements, the next stage is to
register with AMFI. On registration, AMFI allots an AMFI Registration Number (ARN).
Individuals from the exempted category (i.e., who have attained the age of 50 years or have
at least 10 years of experience as of May 31, 2010) can obtain the ARN without passing the
certifying examination, provided they have attended the prescribed CPE program. Minimum
age for obtaining ARN is 18 years.

o Empanelment with AMCs

Armed with the ARN No., the distributor/stock exchange broker can get empaneled withany
number of AMCs. Alternatively, they can become agents of a distributor who is already
empaneled with AMCs. Empanelment with the AMC or enrolment as an agent of an
empaneled distributor is compulsory to be able to sell mutual fund schemes and earn the
commissions.

Institutions that are into the distribution of mutual funds need to register with AMFI. The
employees of these institutions need to clear the NISM Series V-A: Mutual Fund Distributors
Certification Examination and obtain an Employee Unique Identification Number (EUIN) from
AMFI. The Intermediaries have to ensure that the employees quotethe EUIN in the Application
Form for their client’s investments. There is no separate ARNrequired for these employees

47The new cadre of distributors are not required to comply with KYD/bio-metrics requirements. However, they are
required to submit self-attested copies of identity proof (photo PAN card of individual applicants/ in case of Proprietary
concern, PAN card of the Proprietary Concern (if available) or Photo PAN Card of the Proprietor) and address proof, as
mentioned in KYD application form.
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since they operate under the ARN of the institution that they are working for.

6.4.1 Procedure for getting empaneled as a mutual fund distributor with AMC

Empanelment with an AMC is a simple process. There is a Request for Empanelment Form to
be filled in. This provides for basic details, such as:

• Personal information of applicant–Name of person, Age, Trade Name, Contact

Information, ARN, PAN, Income tax category (such as Resident Individual, Company, Non-
Resident Indian, Foreign Company).

• Names and contact information of key people handling sales and operations.

• Business details, such as office area, number of branches, number of employees,

geographical area covered, years of experience, number of investors, number of agents,
fund houses already empaneled in, size of AUM etc.

• Bank details and preferences regarding Direct Credit of brokerage in the bank account.

• Preferences regarding receiving information from the AMC.

• Nominee

• The applicant also needs to sign a declaration, which provides for the following:

o Correctness and completeness of information provided

o Commitment to keep all the transactional information confidential

o Commitment to abide by instructions given, as also statutory codes, guidelinesand

circulars

o Not to issue advertisement or publicity material other than that provided by the
AMC or pre-approved by the AMC

o Ensure that the risk factors are mentioned along with performance and other
related information

o Provide all the information and documents that the AMC may ask for from
time to time

o Ensure that all employees who are engaged in selling or marketing of mutual
funds have an EUIN.

o Undertake not to rebate commission back to investors, or attract investors

through the temptation of rebate/gifts, pass back of commission etc.

o Power to the AMC to terminate the empanelment at any time

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