No foreign trips, gifts to incentivize distributors, Amfi tells mutual funds

livemint.com:

Mint. Asset managers are not allowed to share any commissions or incentives other than the prescribed trail commissions. Trail commission refers to a fee that mutual funds pay their distributors as long as those who bought MF units stay invested.

Amfi said that asset management companies (AMCs) should not offer any incentive including gifts, gift vouchers or any form of entertainment. “Appropriate disciplinary action, including suspension or termination of registration, shall be taken against any distributor found not adhering to the aforesaid guidelines," Amfi said. AMCs can continue to provide training to distributors for knowledge and skill development; however, the participants should not be selected on the basis of any sales target or loyalty programme.

Also, this should be conducted in a central and logistically convenient location in India and not in exotic tourist destinations. Sometime ago, there were media reports of some AMCs offering training in locations like the Andaman and Nicobar Islands for achieving targets in selling some systematic investment plans. All trail commissions should be paid in monetary terms and disclosed on the AMC’s website and in half-yearly consolidated account statements.

Trail commissions based on distributors achieving a certain volume are allowed, with the condition that it is paid post accrual (and not upfronted) and should come from the respective scheme’s account only. Distributors should only pay trail commissions to their sub-distributors and such payments should be in monetary terms. Amfi said that MF distributors can conduct training programmes for their employees or sub-distributors with reasonable expense and in a convenient/central location in India.