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SEBI Keeps a Watchful Eye on Mutual Fund Firms for Providing Rewards, Sponsored Trips to Distributors Upon Meeting Sales Goals


Mutual Fund Update: Such mutual fund companies which are offering sponsored trips to their distributors as an incentive to increase sales, such fund houses have come under the radar of SEBI. Stock market regulator SEBI (Securities and Exchange Board of India) has shared this information with AMFI (Association of Mutual Funds in India), an association of mutual fund companies.

This is the second time in the last 10 months that SEBI has asked asset management companies to avoid giving such incentives or offers. AMFI said, SEBI has again brought to our notice the issue of running promotions and competitions by some asset management companies. Under this, apart from commission, incentives or reward trips are being offered to mutual fund distributors in return for achieving business volume.

Under SEBI rules, mutual fund companies cannot offer any other type of incentive other than commission to mutual fund distributors. However, some mutual fund houses are offering sponsored trips to distributors under the guise of training programs.

It is against the regulatory guidelines for mutual fund distributors to offer reward trips to achieve sales targets. AMFI said that while requesting mutual fund houses to withdraw such incentive offers, they have also been asked to avoid it.

SEBI believes that offering incentives to distributors on achieving sales targets may increase mis-selling. In 2018 also, mutual fund houses were asked to avoid giving any kind of reward or incentive under the guise of training program. In April 2023, AMFI had also written a letter to fund houses warning them against such incentive programs. Direct selling has increased after the Corona epidemic, yet mutual fund companies have to depend on distributors to sell their products.

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