Sharekhan Blog

What is the AMFI Association of Mutual Funds?

  • Jan 31, 2024

SEBI is regulating this industry and has established the foundational rules. AMFI is another regulatory body pivotal in governing mutual fund investments and setting specific guidelines for industry participants. This dual regulatory approach ensures a comprehensive framework, contributing to the industry's credibility and the security of millions of investors engaging in mutual fund investments. So, let's discuss this body called AMFI, the mutual fund association, in detail.

Meaning of AMFI

Association of Mutual Funds in India, serving as the collective body for SEBI-registered mutual funds. Established on August 22, 1995, it comprises 43 SEBI-registered Asset Management Companies members. As a non-profit government business, AMFI plays a pivotal role as the primary regulator of the mutual fund industry, operating within the guidelines set by SEBI.

With a commitment to upholding particular standards and ethical practices in investing and trading, AMFI is a guiding force in the mutual fund landscape. Through its regulatory framework, this association endeavors to ensure the integrity and reliability of the mutual fund industry, contributing to investors' overall trust and confidence.

What are the Main Objectives of AMFI?

1.    Upholding Standards and Code of Conduct

AMFI plays a crucial role in ensuring that Asset Management Companies (AMCs) and other entities in the mutual fund industry adhere to a defined code of conduct and standards. This oversight contributes to maintaining ethical practices within the industry.

2.    Investor Awareness and Protection

A key responsibility of AMFI is to enhance investor awareness and safeguard their interests. By providing education and ensuring transparency, AMFI aims to empower investors and foster a sense of security in their mutual fund investments.

3.    Disciplinary Actions Against Violators

In cases of non-compliance with the set code of conduct, AMFI takes disciplinary actions against entities that violate the standards. This commitment to enforcement is fundamental to preserving the integrity of the mutual fund industry.

4.    Grievance Redressal for Investors

AMFI provides a robust platform for investors to address grievances and register complaints against various parties, including fund managers, brokers, or fund houses. This mechanism ensures a secure and concrete channel for investors to voice concerns.

5.    Safeguarding the Interests of AMCs and Industry Representation

AMFI acts as a safeguard for the interests of Asset Management Companies (AMCs) and represents the industry in interactions with governmental bodies such as the government, RBI, and SEBI. This representation is crucial in advocating for industry-related matters and fostering collaboration with regulatory authorities.

6.    Collaboration with Regulatory Authorities

AMFI collaborates with SEBI by reviewing guidance and directions working collectively on matters about the mutual fund industry. This collaborative approach ensures alignment with regulatory frameworks and the effective functioning of the mutual fund sector.

What are the Committees Under AMFI?

AMFI works through varied committees dedicated to numerous aspects of mutual fund operations. However, these committees work on various issues like ethics, compliance, investor education, etc., so the industry will function smoothly.

  • Valuation Committees at AMFI
  • Committees overseeing Operations and Compliance at AMFI
  • Committees dedicated to Exchange-Traded Funds
  • AMFI Certification Committee for Distributors
  • Risk Management Committees at AMFI
  • Committees comprising Chief Investment Officers for Equity at AMFI
  • Committees for Financial Literacy under AMFI

What is the Role of AMFI?

The commitment of the Association of Mutual Funds in India (AMFI) is centered on elevating and upholding standards within the mutual sector. Their dedication extends to fostering the Indian Mutual Fund Industry, focusing on moral and ethical principles. AMFI takes on the crucial role of safeguarding the interests of asset management companies and Indian investors, contributing to the overall integrity of the industry.

An essential aspect of AMFI's responsibilities involves monitoring transactions to prevent investors from exploitation, especially during profit redemptions. Simultaneously, the association actively works towards enhancing awareness among investors, empowering them to make more informed and prudent investment choices. Moreover, AMFI is pivotal in ensuring accessibility and transparency in investments, striving to attract a broader spectrum of investors.

In its pursuit of maintaining integrity and transparency and safeguarding investor interests throughout the mutual fund selling process, AMFI manages ARN registrations for individual practitioners. This multifaceted approach underscores AMFI's commitment to the ethical conduct and robust functioning of the Indian Mutual Fund Industry.

What is the AMFI Registration Number?

It is a unique number allotted to every broker, mutual fund agent, distributor, etc., legally registered under AMFI. On top of that, individuals who clear the certification under the National Institute of Securities Market are given ARN. NISM is a public trust running under SEBI that delivers various types of training, both academic and skill-building programs related to the securities market.

Furthermore, senior citizens must clear the CPE or Continuing Professional Education to get the ARN. It is a vital number without it, none can recommend mutual funds to any investor.

The Bottom Line

SEBI functions as the overarching regulatory authority governing varied securities in stock markets, while AMFI is particular to the mutual fund sector. Together, the ethical standards and regulations set by SEBI and AMFI form the bedrock of today's flourishing mutual fund industry, witnessing a surge in investors and traders. Every AMFI member, whether an Asset Management Company, investor, or broker, is subject to penalties for any violation. This collaborative regulatory framework ensures accountability, fostering the integrity and trust that defines the thriving landscape of the mutual fund industry.

Team Sharekhan
by Team Sharekhan

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