Role of AMFI — Industry Association & ARN

What AMFI is, and is not

AMFI is the industry association of asset management companies (AMCs); SEBI-registered AMCs are its members.

It is not a regulator and has no statutory powers. The statutory regulator of mutual funds is SEBI, which makes the regulations, registers funds and can impose penalties. AMFI works within that framework: it sets standards for the industry and carries out specific tasks, among them registering distributors.

ARN and EUIN

Nobody may distribute mutual funds without an AMFI Registration Number (ARN). Two steps lead to it. First, the person passes the required NISM certification: Series V-A, or Series V-D, which also covers Specialized Investment Funds. NISM conducts the certification. Second, AMFI registers the distributor on the strength of that certificate and issues the ARN, which is valid for three years and renewable.

A distributor may be a firm with many employees. Each employee who deals with investors holds an Employee Unique Identification Number (EUIN), which identifies the individual who sold a scheme or dealt with the investor, so that each transaction can be traced to a person. An EUIN is not an investor's number. An investor can verify an ARN on AMFI's website.

The code of conduct

AMFI's code of conduct sets standards for distributors. A distributor describes itself as an AMFI-registered Mutual Fund Distributor, may not promise or indicate returns, may not rebate commission to investors or encourage churning, must disclose commissions, and should seek information to understand the investor's needs. Breaches can lead to suspension or cancellation of the ARN.

The code also guards a boundary. A distributor distributes mutual fund schemes. It may not use titles such as adviser unless it is registered with SEBI as an investment adviser; neither an ARN nor an EUIN makes its holder one.

AMFI's other work

AMFI's website publishes the NAVs of mutual fund schemes, which gives investors one place to look them up. AMFI also publishes, every six months, the list of large-cap, mid-cap and small-cap companies that SEBI's scheme categorisation relies on.

It runs the "Mutual Funds Sahi Hai" investor-awareness campaign; part of scheme expenses is earmarked for investor education and awareness. The campaign explains the product. It is not a promise about returns, which remain market-linked.

Rules at a glance

Key points

• AMFI is the industry association of AMCs; it is not a regulator and has no statutory powers. SEBI is the regulator.
• An ARN (AMFI Registration Number) is needed to distribute mutual funds; it is issued after NISM certification (Series V-A, or V-D, which also covers SIFs).
• NISM conducts the certification; AMFI registers distributors on the strength of the certificate.
• Each employee of a distributor who deals with investors holds an EUIN.
• AMFI's code of conduct sets standards for distributors; a distributor distributes schemes and is not an investment adviser.
• AMFI's website publishes scheme NAVs, and AMFI runs the "Mutual Funds Sahi Hai" investor-awareness campaign.

Common misunderstandings

• AMFI is not a regulator: it is an industry association without statutory powers, and SEBI regulates mutual funds.
• Passing a NISM examination does not by itself allow a person to distribute: registration with AMFI and an ARN are also needed.
• An ARN is not a licence to advise: a distributor distributes schemes, and only SEBI-registered investment advisers may call themselves advisers.
• An EUIN is not held by investors: it identifies the distributor's employee who dealt with the investor.
• "Mutual Funds Sahi Hai" is AMFI's awareness campaign, not SEBI's, and it is not an assurance of returns.

Questions people ask