- The internship plan is being piloted under a regulatory sandbox project approved by the Securities and Exchange Board of India (Sebi) to increase the number of individual MFDs in the country
Industry body, Association of Mutual Funds in India (Amfi), on Monday launched an internship plan under a regulatory sandbox initiative for new qualifying individuals who can be groomed to become mutual fund distributors (MFDs) with an objective to increase the number of MFDs and stimulate financial inclusion.
The internship plan is being piloted under a regulatory sandbox project approved by the Securities and Exchange Board of India (Sebi) to increase the number of individual MFDs in the country.
The internship plan is targeted towards fresh graduates, educated but unemployed individuals, especially those who may have lost their jobs and earnings due to the covid-19 pandemic, retirees, women and housewives who may have taken a mid-career break to take care of their young ones, and all of those now desirous of starting their own venture as self-employed entrepreneurs.
The internship will be sponsored by individual mutual fund houses. Individuals aspiring to become MFDs under this scheme will have an exclusive empanelment and tie-up with a specific ‘sponsor’ asset management company (AMC) for a period of 12 months.
During this period, the apprentice MFD will be supported by the sponsoring AMC towards getting the requisite NISM certification, acquiring Amfi Registration Number (ARN), operational set-up, training on operational aspects and client acquisition along with a stipulated monthly stipend of up to ₹15,000 for a maximum of 12 months.
The apprentice MFD will be empanelled with only one sponsor AMC during the period of apprenticeship but will be free to empanel with more AMCs after the completion of this initial period.
As per the current Sebi regulations, AMCs can pay only trail commission to distributors and no upfront commission is permitted. Although the trail commission model aligns the interests of investors, distributors and AMC by taking away any perverse incentive to churn investments, it takes a few years to build a sizeable AUM that could provide reasonable amount of subsistence income by way of trail commission especially for new entrants.
Under the regulatory sandbox initiative, Sebi acceded to Amfi’s request for relaxation in the above stipulation, so that the AMCs could pay a reasonable stipend to the trainee MFD during the initial phase of her/his career for a maximum of 12 months, till the apprentice MFD builds up sustainable clientele & AUM.
A Balasubramanian, chairman, AMFI said: “When we released the AMFI BCG ‘Unlocking the ₹100 Trillion Opportunity’ whitepaper, we had envisioned growing the Mutual Fund Distributor base from around 1 lakh distributors to 5 lakh distributors. Thanks to the Sebi’s regulatory sandbox, we are looking to add around 5,000 apprentice MFDs this year who will be trained and supported by the industry till they are ready to be on their own.”
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