1. AMFI stands for Association of Mutual Fund Industry.
  2. New distribution channels have emerged, both institutional and non-institutional, like AMCs, Independent Financial Advisors, Post Offices, Self-help Groups, Banking Companies, Non-Banking Finance Companies, Brokerage houses, Stock Exchanges and Internet.
  3. Internet is a distributing channel with a very low cost.
  4. PSU Banks, Private and Foreign banks also got engaged in distribution of MF products since banks have a reach in all parts of the country.
  5. A new cadre of distributors comprising of postal agents, Retired Bank/Government officers or retired teachers with a service of at least 10 years is also authorised by SEBI to function as distributors for handling only the Simple and Performing Mutual Fund Schemes.


  1. An AMC (Asset management Company) can appoint an Individual, a Distribution Company, a Bank or any NBFC as a distributor.
  2. SEBI Approval is not required for an AMC to appoint a distributor
  3. Permission from SEBI is not required for appointing a Bank or a stock broker as a Mutual Fund Distributor
  4. Relationship between an AMC and a distributor is on a basis of Principal to Principal.
  5. An agreement between the AMC and the Distributor is required to form the basis of appointment of a mutual fund distributor.
  6. KYD stands for Know Your Distributor.
  7. Bio Metric document verification procedure is adopted for KYD process.
  8. NISM stands for National Institute of Securities Market
  9. All MF Distributors, agents or any persons employed for distribution of MF products need to pass NISM Series V-A Exam.
  10. Brokers of Recognised stock exchanges can also work as distributors after passing the test of NISM.
  11. After completing KYD requirements, a registration with AMFI is required.
  12. ARN stands for AMFI Registration Number. AMFI gives ARN Number to distributors which is to be renewed every three years.
  13. ARN holders also need to get empanelled with AMCs .
  14. Professionals working with intermediaries and engaged in sales/marketing process of mutual fund products must obtain EUIN (Employee unique identification number) from AMFI.


  1. There are two routes for investors to invest in MF schemes which are generally called Direct Plan and Regular Plan. Direct plans are not routed through distributors and do not have any brokerage.
  2. More and more investors are making investment in direct plan of various schemes through the web sites of Mutual Funds.
  3. SEBI has not specified the commission structure to distributors . However, SEBI has fixed total expense ratio, popularly known as TER.
  4. The Expense Ratio of the Direct Plan of a particular MF Scheme will be lower than the Regular plan of the same scheme since there will be no brokerage.
  5. No commission is payable to a distributor on his own investments.
  6. Asset management companies pay Trail Commission to agents in successive years until the investment is withdrawn.
  7. Trail Commission payable by AMC to distributor is calculated on NAV of related investment based on daily balances.
  8. Trail commissions are linked to valuation of portfolio in the market.
  9. No upfront commission is payable by an AMC to the distributor.
  10. Transaction charge for an existing Investor investing a sum of Rs 10000 and above will be Rs.100 per transaction.
  11. Transaction charges on SIP are applicable only if committed investment is equal to or more than Rs. 10000.
  12. Transaction charges are to be borne by the investor.
  13. Distributors have an option of opting out of charging Transaction Charges but it will be applicable only at the distributor level or based on a type of product.
  14. AMCs need to disclose the commissions and expenses paid to certain large distributors.


  1. A distributor is liable for the acts and defaults of its agents/ sub brokers.
  2. AMC is not liable for the acts or defaults of the distributor or distributor’s sub brokers


  1. As per Code of Ethics and Code Of Conduct, All Distributors/Market intermediaries have to keep Investor’s Interest at the top.
  2. All Distributors doing selling or distribution of MF should have the knowledge of the provisions of AMFI Code Of Ethics (ACE) and AMFI Code of conduct for intermediaries of Mutual Funds (ACCIMF).
  3. Mutual Fund distributors have to disclose all the commission payable to them by AMC.
  4. Distributors have to be fully conversant with the key provisions of the Scheme Information Document (SID), Statement of Additional Information (SAI) and Key Information Memorandum (KIM)
  5. The practice of sharing the part of commission with the investor or pass back of commission is banned.


  1. Advertisement Code for Mutual Fund has been mandated by SEBI.
  2. Advertisements regarding Mutual Fund schemes shall not contain statements which directly or by implication or by omission may mislead the investor.
  3. All advertisements shall be accompanied by statutory warning stating “Mutual Fund Investments are subject to market risk, read all scheme related documents carefully”
  4. Where MF scheme is more than 3 years old, the performance in advertisement will be provided in terms of CAGR for past 1, 3 and 5 years and since inception
  5. In case of Money Market, cash or Liquid schemes, performance can be advertised by simple annualization of yield if performance is available for at least 7,15 and 30 days.
  6. Where the scheme has been in existence for less than one year, past performance shall not be provided or advertised.
  7. Celebrity endorsement is not permissible for a particular Mutual Fund Scheme.

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[WATU 12]

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