Now, AMCs to keep an eye on foreign MF distributors

NISM certification qualifies a distributor or an advisor to sell mutual fund products

Foreign distributors of mutual funds (MFs) will now be monitored by asset management companies (AMCs) engaging them.

According to a circular issued by the Association of Mutual Funds in India (Amfi), AMCs will now be responsible for the compliance of foreign distributors, in the absence of an Amfi registration.

“AMCs are required to ensure compliance by the overseas distributors with the extant laws, rules and regulations of jurisdictions where they carry out their operations in the capacity of distributors while empanelling them,” said the circular.

“It is clarified that since Amfi registration is not required by Sebi. Amfi would not be carrying out due diligence on these distributors on behalf of the mutual fund industry. AMCs will be fully responsible for any Sebi-related requirements on these distributors,” said the circular.

These distributors are not required to obtain a National Institute of Securities Markets (NISM) certification either. An NISM certification qualifies a distributor or an advisor to sell MF products.

A Sebi clarification in July 2012 had exempted foreign distributors from obtaining NISM certification. Amfi registration was also not required to comply with know-your-distributor process.

“It is not relevant for overseas distributors to have an NISM certification. With the Amfi registration and the NISM certification out of the way, it has now become easier for them to sell Indian product outside India,” said R S Srinivasan Jain, chief marketing officer of SBI Mutual Fund.

MF industry officials said the demand among investors outside India for these products has diminished over time.

“There was a time when the demand for Indian mutual fund products was high. But that is not the case now,” said Akshay Gupta, chief executive officer of Peerless Mutual Fund. “However, this move could be seen an improvement in the demand as it would encourage these distributors to sell these products. It could also bring in more dollars,” he added.  Industry officials said the non-resident Indian community was still interested in these products, particularly the debt segment.

Half a dozen of the top MFs have established an international presence with offices in cities including Dubai, Singapore, Hong Kong and London, according to those in the industry.