DDQ is not meant only for the select few ; it is a minimum compliance set to be followed by every Mutual Fund distributor, to shape up a perfect business model
2. SEBI Mandated the AMCs/ Mutual Funds -
to regulate the distributors in the interest of investors
to put in place a due diligence process
to satisfy themselves about the fit and proper criteria of their distributors
3. ROLE of AMFI
To design a unified due diligence exercise on behalf of AMCs and in accordance
with the SEBI guidelines/ circulars
To appointed Chartered Accountant firms for conducting this exercise.
4. What AMFI coded ?
Oath : Consider investor's interest as paramount and take necessary steps to
ensure that the investor's interest is protected in all circumstances
SEBI is your big boss and I am the MD and AMC are your reporting boss
Recommend schemes appropriate for the investor's risk profile and needs
Highlight risk factors of each scheme, desist from misrepresentation and
exaggeration
Commission disclosure should be comparative and simple
Maintain necessary infrastructure to support the AMCs in maintaining high service
standards to investors
5. AMFI codes -2
Do not undertake commission driven malpractices
Abstain from making negative statements about any AMC or scheme and ensure that
comparisons, if any, are made with similar and comparable products along with
complete facts
Shall keep themselves abreast with the developments relating to the Mutual Fund
Industry
Intermediaries shall not rebate commission back to investors
Shall ensure that the employees quote the EUIN in the Application Form for
investments
Be diligent in attesting / certifying investor documents and performing In Person
Verification (IPV) of investor's
6. AMFI codes -3
Concealment of information and facts to make a scheme look attractive will be
deemed the bigger misconduct than providing the wrong information
Render at all times high standards of service, exercise due diligence, and ensure
proper care ( CRM, feedback, evaluation, complaints etc)
Be informed that , any switches made after 1st January 2013, in a Reg to Direct
Pan will attract claw back ( full or proportionate)
Intermediaries satisfying the criteria specified by SEBI for due diligence exercise,
shall maintain the requisite documentation in respect of the "Advisory" or "
Execution Only" services provided by them to the investors
7. WHAT WILL YOU ACHIEVE THROUGH
DDQ ?
Due Diligence will help you achieve a most perfect base and guideline for your
distribution business
8. ASPECTS COVERED IN DDQ -1
Organizational controls to ensure that the following processes are delinked from
sales and relationship management processes and personnel:
Customer risk profile/ investment objective evaluation
Mutual Fund scheme evaluation and defining its appropriateness/ suitability to various
customer risk categories;
9. ASPECTS COVERED IN DDQ -2
Review
Your Management processes of Compliance and risk management functions
the disclosures made by you to the customer
your ‘Advisory’ or ‘Execution only’ modle, in respect of the customer relationship and
transactions
10. ASPECTS COVERED IN DDQ -3
Record of regulatory/ statutory levies, fines and penalties, legal suits, customer
compensations made, causes for these and resultant corrective actions taken , if
any
11. HOW QUESTIONS ARE DIVIDED ?
Section 1: About the Distributor
Section 2: Organization Structure
Section 3: Mutual Fund Business Activities
Section 4: Customer Related Processes
Section 5 : Human Resources Management
Section 6: Compliance and Risk Management
Section 7: General Operations
Section 8: Legal
12. Section 1: About the Distributor
This speaks about your profile, education and core competency
13. Section 2: Organization Structure
MF distribution is a business which grows by Time Value and Sales Value. In this
Section, they want you to decide your long term business structure :
It should be trustable model for whole life servicing guarantee
It should have a multi generation model
It should be clearly defined in terms of successor and hierarchy
14. Adopting a CRM tool is the key
Leadsqaure
Zoho
…etc
15. Section 3: Mutual Fund Business Activities
Financial Planning
Risk Profiling
Product Suitability Process
Transaction Process
Welcome Kit
Evaluation and Feedback Process
16. Section 4: Customer Related Processes
Onboarding Process
Order Management Process
E mail
Order Form
Order Execution Process
Offline – through individual AMC forms
Offline – through RnT Common Form
Online – through RnT Platform
Online – through NSE/BSE/MFU platform
Online – through Client End portal or App
Order confirmation Process
Phone
E Mail
Letter
17. Section 5 : Human Resources
Management
They seek your method of hiring the right team who will follow the compliance
during the working
They seek your method of incentivicing the team , to ensure that there is no
sales biasness
18. Section 5 : Human Resources
Management
Do you have a clear cut KPIs for your Team which is in customer’s interest?
Do you have a regular Training and update process for yourself and your Team ?
Do you have a centralized number, standard E mail and common query center
to avoid person dependent support services ?
Do you have a process of educating the Team members with regulators circulars
and business vision
19. Compliance and Risk Management
Do you have any Risk Management Strategy for your business ?
Data Risk
Transaction Risk
KYC and wrong investments Risk
Team Insurance
Office Insurance ..etc
Do you have any Compliance process in Place ?
EUIN
KYD
Certifications
System Audit
Transaction Audit
Environment
HR related – EPF, etc
20. Section 7: General Operations
Branches
Websites
Mobile App
Office Timings
21. Section 8: Legal
Disclaimers
Letter Heads and other stationary
Advertisements
Communications
Addendums and changes
Disclosure
22. SAMPLE SHEET OF DDQ
Mail me at admin@armfintech.com for your queries
Or contact Abhinesh Kumar, Mobile : 9307218766
Website : http://armfintech.com
