Mutual Funds · intermediate
How Mutual Funds Are Distributed
Who a mutual fund distributor is, how distributors are registered and paid, what they must disclose, how direct and regular plans differ, where distribution ends and advice begins, how fund houses check large distributors, the code of conduct, and complaints.
- 01Who Is a Mutual Fund Distributor?A mutual fund distributor sells schemes to investors and is paid commission by the fund house. This lesson explains what a person or firm needs before it can distribute, who may hold that registration, and what a distributor is not.
- 02ARN and EUIN: the Registration Behind a DistributorTwo numbers identify who is selling a mutual fund: the ARN, which belongs to the distributor, and the EUIN, which belongs to the individual who dealt with the investor. This lesson explains how each is obtained, how long it lasts, and what registration does and does not show.
- 03How a Distributor Is PaidA distributor is paid commission by the fund house out of the scheme's expenses, as trail on assets that stay invested. This lesson explains the trail model, the two narrow exceptions to it, and two older charges that no longer exist.
- 04What a Distributor Must Disclose: Status and CommissionAn investor in a regular plan is entitled to know who they are dealing with and what that person is paid. This lesson covers the description a distributor must use, where commission is shown in rupees, and the rules on disclosing and rebating commission.
- 05Direct and Regular PlansEvery scheme has a regular plan and a direct plan. This lesson explains what is the same in both, what differs, who may deal in each, and how a gap in expense ratios is worked out in rupees.
- 06Due Diligence of Large Distributors by Fund HousesSEBI requires fund houses to carry out due diligence on their larger distributors. This lesson explains who carries the duty, the four size tests that bring a distributor within it, what the review looks at, and what it does not cover.
- 07Distribution Versus AdviceSelling a product and advising on it are regulated separately. This lesson sets out what a mutual fund distributor may do, what counts as investment advice, how a distributor and a SEBI-registered investment adviser are each paid, and why titles are restricted.
- 08The Code of Conduct, Checking an ARN and Where to ComplainAMFI's code of conduct sets out how a distributor must behave, so it tells an investor what to expect. This lesson covers what the code forbids and requires, how to check an ARN, and where a complaint goes.