Capping scams: AMFI revises code of conduct for mutual fund intermediaries

Jan 31 2013, 18:38 IST
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SummaryAMFI added fresh directives to protect investors from fraud and stop illicit money reaching funds.

With an aim to check the flow of illicit money into mutual funds and safeguard the interest of investors, industry body AMFI has revised its code of conduct guidelines for the fund houses and distributors.

In a 27-point revised code of conduct document for mutual funds intermediaries, the Association of Mutual Funds in India (AMFI) has added fresh directives to protect investors from potential frauds, insisted on Know Your Distributor norms and thereby ensure scamps get tightly capped.

It has asked intermediaries to provide all documents of its investors in terms of the Anti Money Laundering/Combating Financing of Terrorism requirements.

The AMFI has also asked the intermediaries to ensure that the investor's address and contact details filled in the mutual fund application form are their own, and not of any third party, so that the investors are protected from any potential fraudulent activities.

Wherever the required information is not available in the application form, intermediary have been asked to make reasonable efforts to obtain accurate and updated information from the investor.

"Intermediaries should abstain from filling wrong/incorrect information or information of their own or of their employees, officials or agents as the investor¿s address and contact details in the application form, even if requested by the investor to do so," the revised code says.

The industry body, which also acts as a self-regulatory organisation, has also asked intermediaries to abstain from tampering with the application forms submitted by investors, including by inserting, deleting or modifying any information in the form provided by the investor.

AMFI had last revised the code of conduct for mutual fund intermediaries in September 2009. Mutual fund intermediaries were governed by AMFI Guidelines and Norms for Intermediaries, drafted in 2002.

The entities working in mutual fund segment have also been asked to provide their cooperation and support to AMCs (Asset Management Companies), AMFI, regulatory authorities and applicable due diligence agencies in relation to the activities of the intermediary or any regulatory requirement.

AMFI has directed intermediaries to maintain the requisite documentation in respect of the 'Advisory' or 'Execution Only' services provided by them to the investors.

"Do not indulge in fraudulent or unfair trade practices of any kind while selling units of Schemes of any mutual fund," AMFI has told the intermediaries.

"Selling of units of schemes of any mutual fund by any intermediary directly or indirectly by making false or misleading statement, concealing or omitting material facts of the scheme, concealing the associated risk factors

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