Now, MF mis-sellers come under radar

Unique employee code for those selling these products, to be given in customer sale form, to enable identification on complaints

The Association of Mutual Funds in India (Amfi) has mandated all executives of banks and distribution agencies to provide a consumer their Employee Unique Identification Number (EUIN) while selling MF schemes.

The move is aimed at making staffers accountable for what they sell, as various instances of mis-selling continue to plague the sector. "An investor does not know until four or five years later that he has been mis-sold a product. Then it becomes difficult to track down the employee who sold it, as he might left the organisation by then," said V Ramesh, deputy chief executive, Amfi. The new rule took effect from June 1 in all sale forms.

The Securities and Exchange Board of India (Sebi) has been increasingly concerned about the problem. MF sector officials said the regulator had been flooded with complaints from clients of various multinational banks in this regard. These include selling products beyond the risk capabilities of clients, with false guarantees of returns.

This had led to Sebi issuing an order in September 2012, asking Amfi to create a unique identity number of the employee or relationship manager or sales person of the distributor involved in the sale of MF products. To generate the EUIN, employees have to pass the examination of the National Institute of Securities Markets and then register with Amfi. Firms were given time till June to comply. "Employees selected for the purpose of selling MF products were already being trained and registered with Amfi by the organisations. While they had their individual ARNs (Amfi Registration Number), they were only required to provide the corporate ARN at the time of sale," said Debasish Mallick, managing director, IDBI Asset Management.

However, not all employees who sold MFs were qualified or registered, said officials. Some were given internal employee codes and information on these staffers remained within the organisation.

"The idea is to now externalise the information, so that Amfi and Sebi can now go specifically down to that employee who was involved in mis-selling and then action can be taken against him," said Askhay Gupta, chief executive officer, Peerless MF.

Under existing procedure, an employee found guilty of mis-selling is, after proven guilty, put on a blacklist and banned from further sales. The EUIN also acts as a credit score, tracking other activities of the seller like the number of sales done, the sort of investment advice given and so on.

UNDER SCANNER

• Effective June 1, all application forms will include the Employees' Unique Identification Number (EUIN) code along with the ARN code
• EUIN is an identity number given to MF industry employees engaged in the sale of mutual fund products
• These employees will have to pass the NISM examination and get registered with Amfi
• EUIN will also keep track of other activities of the seller, including the number of sales, sales targets met and the investment advice given