Mutual fund investments are the top investment choice for millions of Indians due to their multiple benefits and ease of investment. Therefore, the need for regulating this industry is of paramount importance. While SEBI has laid down the ground rules and the framework for this industry, there is another regulatory body, AMFI, that also governs mutual funds investments and has laid down specific rules for the participants of the industry.
Given below are the details of AMFI, its importance, and related details that can help investors in making better investment decisions.
What does AMFI mean?
AMFI is the abbreviation used for Association of Mutual Funds in India. This body is the association of SEBI registered mutual fund houses and was incorporated on 22nd August 1995. Currently, there are 43 members of this association that are SEBI registered Asset Management Companies (AMCs). This association is a non-profit government organization and is the prime regulator of the mutual fund industry under the guidelines of SEBI. AMFI has set specific standards and ethics of investing and trading in the mutual fund industry and strives to uphold the same.
What is the role of AMFI in a Mutual Fund?
The AMFI acts as the regulator for all the participants in the mutual fund industry. It takes directions from SEBI and ensures smooth implementation of the rules and regulations maintaining a balance between the progress in the industry as well as safeguarding each participant’s interests. With the mutual fund industry being heavily dependent on online platforms, AMFI also ensures that these platforms provide ease of access and investment as well as safety and security of the identity as well as the investment of every investor.
AMFI ensures transparency in each step of the transactions in the industry thereby bringing in accountability. It is given the responsibility of ensuring that best business practices are followed by all the parties involved in a trade after a thorough review and discussion of various rules and regulations that need to be updated from time to time.
Through the issue of ARN and increasing investor awareness, the AMFI ensures that the chances of fraud are reduced and the mutual fund industry functions by maintaining the highest standards set by SEBI and AMFI together.
What are the objectives of AMFI?
The core of the formation of AMFI was with a view to increase investor awareness and ensure the safety and security of the interest of all the participants of the mutual fund industry, especially the investors. with this view, AMFI has set a few objectives which are mentioned below.
- Ensuring that the AMCs and all the other parties in the mutual fund industry follow the code of conduct and the standards defined by AMFI.
- Increasing investors’ awareness and safeguarding their interests.
- Taking disciplinary actions against the violators of the code of conduct set by AMFI
- Providing a safe and concrete portal for the investors to address their grievances and registration of complaints against any party like find managers, brokers, or fund houses.
- Safeguarding the interest of the AMCs
- Representing the government, RBI, SEBI, etc. on all matters relating to mutual funds.
- To review guidance and directions from SEBI and work with them on matters concerning the mutual fund industry or any aspect of the same.
Committees under AMFI
The AMFI acts as the umbrella body for the entire mutual fund industry. For better efficiency, there are various committees under the AMFI. These committees under AMFI are mentioned below.
- AMFI Financial Literacy Committees
- AMFI Committee on Certified Distributors (ARN Committee)
- AMFI Operations and Compliance Committee
- AMFI Risk Management Committee
- AMFI Equity CIO’s Committee
- AMFI Valuation Committee
- AMFI ETF Committee
What is AMFI Registration Number (ARN)?
The mutual funds market is flooded with multiple brokers, agents, etc. These parties help in the investment process by simplifying it for the end investors. However, there may be chances of investors being duped of their hard-earned money if they encounter fraudulent intermediaries. Therefore, AMFI has issued specific registration numbers also known as ARN (AMFI Registration Number).
The ARN is issued after the eligible party has cleared the necessary eligibility criteria and is credible to carry out the designated functions without any chances of potential damage to the investors’ interests.
AMFI specifies that a person eligible for getting ARN has to be a minimum of 18 years old and also get the necessary clearance from NISM (Nationalism Institute of Securities Market). The conditions of AMFI also specify that senior citizens wanting to get ARN have to clear the required CPE (Continuing Professional Education) to get up to date with the latest norms and conditions as per AMFI requirements.
The AMFI ARN is the license issued by the AMFI to sell mutual fund units. Therefore, it is mandatory for any interested party that wants to sell mutual fund units to get a valid ARN without which they are not eligible to sell any units. The AMFI has the authority to withdraw or revoke the ARN under specific conditions,
- Established violation of code of conduct
- A complaint filed by any investor or other party regarding any negligence that is upheld by a court of law.
- The entity having the ARN has committed a serious offense.
Why should investors know about the ARN?
ARN is issued to eligible participants after due certification as per AMFI regulations. Brokers and other intermediaries are allowed to sell mutual funds to prospective buyers only if they have a valid ARN.
The fund houses that have a valid ARN have better investor confidence as they are better informed. They can thus guide them better in terms of understanding market trends and recommending various mutual fund products based on individual needs. Therefore, it is prudent to investors to check the ARN of the mutual fund houses to ascertain their credibility.
Other services of the AMFI
Some of the additional services provided by AMFI apart from updating the NAV of mutual funds on daily basis include the following,
- Issue ARN ID cards to various organisations and individuals that are part of the mutual fund trading community.
- Streamlining the investor’s search for mutual fund agents based on key details like the location, PIN code, etc.
- AMFI is also charged with providing crucial information related to the mutual fund distributors’ circulars, announcements, and intermediaries. Such information can help investors in getting crucial information related to teh MFI member fund houses and invest accordingly.
SEBI is an umbrella governing body that has rules and regulations with respect to various securities in the stock markets. AMFI on the other hand is specific to the mutual fund industry. The ethics and norms set by SEBI and AMFI collectively have laid the foundation of the mutual fund industry of today which is continuously seeing an all-time high number of investors and traders. Each member of the AMFI, whether they are AMCs or any individual investor or broker is liable to penal actions in the event of any violation of its rules or breach of contracts.
Yes. AMFI has the authority to revoke the ARN of any member under the specified conditions after due diligence and providing the aggrieved party a chance to rectify their breach of any conduct.
The ARN is issued by AMFI to any of the intermediaries in the mutual fund trade like the brokers, agents, etc.
Currently there are 43 AMCs that are part of AMFI
An eligible person can register for ARN through the online or offline mode of the AMFI and provide the necessary fees and certification proving their eligibility.
The key areas of focus for AMFI are protecting investors’ interests and ensuring transparency in the functioning of the mutual fund industry.