Amfi to unveil Know Your Distributor rule on Aug 1

Written by Chirag Madia | Mumbai | Updated: Jul 30 2010, 15:41pm hrs
In order to bring more transparency among the intermediaries and curb fraud cases, the Association of Mutual Funds in India (Amfi) will introduce Know Your Distributor (KYD) norms from August 1, 2010. Amfi is planning to rope-in the service of NSDL Database Management Services for this purpose.

HN Sinor, CEO, Amfi, said, We will finalise all the detail guidelines regarding the KYD norms in the coming days. We brought this rule after detecting a fraud case. He added if investors are willing to comply with KYC, then why cant distributors comply with KYD. In its letter to the members, Amfi stated that, as KYC committee is already conversant with the KYC process, you are requested to workout detail norms and guidelines to be put in place for KYD and finalise process for implementing in consultation with NSDL DMS. There are over 1 lakh Amfi Registration Number (ARN) holders and Amfi is planning to cover them all under the KYD ambit over the next six months for which distributors will have to incur a minor expense of over Rs 300-400.

Surajit Misra, executive vice president and national head-mutual funds at Bajaj Capital said, I am not aware about the development. However, if we are asked to give the details for KYD norms we will happily do it.

However, some of market players say that the challenge is that of reaching all the distributors, while NSDL DMS has national skills registry at 20 major cities. According to a recent BCG report on mutual funds, 34% of assets of Independent Financial Advisors (IFAs) come from cities and towns beyond the top 30 cities of the country.