Do’s & Don’ts for MFDs – Key Points
Do’s & Don’ts for MFDs – Key Points
Role of MFDs
- Recommend mutual fund (MF) schemes based on investor’s risk profile and goals.
- Assist investors in executing MF transactions.
- Provide after-sales support like KYC updates, nomination changes, and portfolio review.
Investment Advice & Incidental Advice
- MFDs can provide only incidental advice while recommending MF schemes.
- MFDs cannot offer financial planning or holistic investment advice unless SEBI-registered as Investment Advisers (IAs).
- MFDs must not use terms like "Financial Planning" or "Financial Advice" in advertisements unless registered as IAs.
Goal-based Investments
- MFDs can provide incidental advice for goal-based investments like SIPs for travel, education, home buying, etc.
Risk Profiling & Record Maintenance
- MFDs must conduct risk profiling before recommending any scheme.
- MFDs should maintain records of customer risk profiles for future reference.
Execution-Only vs. Advisory Relationship
- Execution-Only – Investor chooses and executes transactions without MFD’s advice.
- Advisory – MFD provides basic/incidental advice to help with scheme selection.
Execution-Only Transactions Obligations
- If an execution-only transaction is unsuitable, the MFD must inform the client in writing.
- Client’s acknowledgment of non-suitability must be recorded and stored.
Advertising & Social Media Usage
- MFDs can advertise in print, digital, and social media while complying with SEBI and AMFI guidelines.
- No rebates, gifts, free advice, or free portfolio reviews should be offered.
- MFDs can launch YouTube/Instagram channels for educational purposes only, not for scheme-specific recommendations.
Scheme-Specific Recommendations & Performance Comparisons
- MFDs must not recommend specific schemes on public platforms (YouTube, social media, etc.).
- MFDs can share AMC fact sheets or reliable performance reports with clients.
Portfolio Review for Non-Clients
- MFDs can review portfolios of investors who approach them but cannot poach clients using inducements like gifts or rebates.
Marketing & Sales Material
- MFDs must use AMC-approved marketing material and not create their own scheme-specific promotional content.
Multiple Financial Products & Websites
- MFDs offering multiple financial services can have a common website but must display their AMFI registration number clearly.
Customer Record-Keeping & Complaints Handling
- MFDs must maintain records of risk profiles, suitability assessments, and investor complaints.
- MFDs should help resolve investor complaints and keep a register for tracking grievances.
Sales Promotion & Rewards for Sub-Distributors
- MFDs can launch sales contests for sub-distributors, but mis-selling is prohibited.
- MFDs cannot pay upfront commissions—only trail commissions in monetary form are allowed.
- Training programs for sub-distributors should be held at centrally located places, not exotic tourist destinations.
These points summarize the key responsibilities, restrictions, and guidelines for MFDs to ensure compliance with SEBI and AMFI regulations. ????