SEBI to AMCs: No investor documentation, no commission

The Securities Exchange Board of India (SEBI) has said that asset management companies (AMCs) would now have to ensure they have all investor documentation from distributors. Maintaining documentation is now the responsibility of AMCs and this documentation would include know your client (KYC) and power of attorney (POA) documents.The market regulator has said that mutual fund distributors would not be paid commission if they do not comply with the aforementioned norms.SEBI further said that AMCs would have to seek documents for all past transactions and ask for confirmation of folios from investors.It is also being learnt that the regulator has slammed AMCs for inconsistent practices. However, it has prohibited no objection certificate (NOC) requirement for change in MF distribution.SEBI has slammed AMCs on two accounts that have been concerning the regulator for a very long time. The first being the asset management companies demand for a NOC for investors wanting to change their MF distributors. SEBI says no NOC is required for a change in MF distributors. SEBI also says that this is an inconsistent practice causing hardships to investors. It has asked Associations of Mutual Funds in India (AMFI) which is the industry body to ensure that this practice is discontinued.Earlier in 2007 AMFI had come out with a set of guidelines to discontinue this practice but some AMC’s had insisted on asking for the NOC. The second development is that SEBI has asked AMCs to maintain documents relating to the KYC and the POA of all investors. SEBI says that maintaining documentation is a responsibility of the AMC, now distributors have been asked to provide all the relevant documents to the AMC and SEBI has taken a tough stance saying that no commission would be paid to distributors who do not comply with this.AMC’s have also been asked to seek documents of all past transactions and what they are doing is to send a statement across to investors to get a confirmation on the folio and transactions.AMC’s are also being asked to set up an investor grievance mechanism to redress investor grievances. These two matters have been bothering SEBI for a while have now seem to be sorted.