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• AMC has the power to terminate agreement at any time, after due notice
• Trail commission is paid as long as the investor remains invested in the fund.
– Calculated on the current market value (units brought in by the distributor x current NAV of
the units)
– Paid for the time period of which the investor remains with the fund
– AMFI has imposed a ban on trail commission for transferred assets
– Money saved by AMC is to be used for investor education
Sales Practices
• Distributor actions must be in the interest of the unit holders.
• Distributors have to follow AMFI's code of ethics (ACE) as well as well as those prescribed
by the concerned AMC, AMFI and SEBI.
• AMFI and fund houses have put in place a set of guidelines to be followed by the
distributors. These include the following:
– A mutual fund is not accountable for the activities of the sub-brokers of
a distributor.
– Distributors must have complete knowledge of the product on offer.
– Distributors must know their clients’ needs and profile.
– The product chosen must meet the clients’ requirements.
– Distributors must encourage good investment habits such as long-term
and regular investment.
– Distributors must provide good and efficient after-sales service.
SEBI Advertisement Code
• SEBI has prescribed advertisement code for mutual funds which is
mandatory and is as under:
– Standard measures to compare such as Annual Yield, CAGR etc.
– Annualised yields for at least one, three, five years & since launch
– For less than 1 year performance, Absolute Return without annualisation
– Past gains may not repeat in future
– Risk factors prominently stated
– Appropriate benchmark to be chosen
– Any ranking of fund to be explained
– In hoardings/posters , the statement, “ MF investments are subject to market
risks, read the offer document carefully before investing” , is to be displayed in
black letters.