Who is a Mutual Fund Distributor?

Mutual funds have grown in popularity over the years among investors looking to build long-term wealth. For most investors, however, navigating the endless landscape of mutual funds can seem daunting and often confusing. Here is where a mutual fund distributor comes into the picture.

An MF distributor can help investors choose the fund that is right for them based on their financial goals, risk tolerance and investment horizon. They essentially act as a bridge between investors and mutual fund houses. In this article, we are going to explore who a mutual fund distributor is, their roles and responsibilities, and the eligibility criteria for becoming one.

Mutual Fund Distributor (MFD) 

A mutual fund distributor (MFD) is an individual or entity certified by the Association of Mutual Funds in India (AMFI) to sell mutual fund investment schemes to investors. An MF distributor is also authorised to provide guidance to investors to help them select mutual fund schemes that align with their financial objectives, investment horizon and risk tolerance level.

MFDs earn a commission from the asset management companies (AMCs) whose mutual fund schemes they sell to investors. The commission structure varies depending on the AMC and their policies, the investment amount and the duration for which the investment is held.

In essence, the best mutual fund distributors not only sell mutual funds but also educate investors about market trends, asset allocation and portfolio diversification.

What are the Roles and Responsibilities of a Mutual Fund Distributor? 

A mutual fund distributor has several key roles and responsibilities. Here is a quick overview of some of their key obligations.

• Investor Education 

Educating the investors is one of the key roles of an MF distributor. They create awareness among investors about the different types of mutual fund schemes available for investing, the differences between the schemes and the benefits and risks associated with them.

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• Assessment of Investors’ Needs 

An MFD is also responsible for thoroughly evaluating an investor’s financial goals, risk appetite and investment horizon. They then recommend mutual fund schemes that are suitable for the investor based on their assessment.

• Facilitating Investments

An MF distributor assists investors with purchasing units of their desired mutual fund scheme for which they earn a commission from the respective AMC. This includes completing the application process and all other associated paperwork on behalf of the investors. Additionally, MFDs also facilitate other transactions like redemption of mutual fund units and mutual fund scheme switching and transfer.

• Providing Support

Mutual fund distributors also provide ongoing support to investors in the form of tracking investment performance, addressing their queries and suggesting portfolio improvements.

Eligibility Criteria for Becoming a Mutual Fund Distributor

According to the regulations laid out by the Securities and Exchange Board of India (SEBI), an individual desirous of becoming a mutual fund distributor must first satisfy the following eligibility criteria.

• The applicant must be at least 18 years of age.
• The applicant must have passed the NISM Series V-A: Mutual Fund Distributors Certification Examination course conducted by the National Institute of Securities Market (NISM).
• The applicant must register with the AMFI and obtain an AMFI Registration Number (ARN).

Note: A non-individual entity desirous of becoming a mutual fund distributor must have at least one employee of the entity who has satisfied the above eligibility criteria and possesses a valid Employee Unique Identification Number (EUIN) from AMFI.

Once these criteria are fulfilled, the applicant becomes a certified mutual fund distributor and can associate themselves with AMCs to sell mutual fund schemes to investors.

How to Become a Mutual Fund Distributor? 

If you are wondering how to become a mutual fund distributor, here is an overview of the steps you need to follow.

• Step 1: Ensure You Satisfy the Eligibility Criteria 

Firstly, you must ensure that you meet the minimum age requirement if you are an individual. If you plan to apply as an entity, make sure that at least one of your employees satisfies the eligibility criteria.

• Step 2: Get the Necessary Certification 

Once you have ensured that you meet the minimum age requirement, enrol for the NISM Series V-A: Mutual Fund Distributors Certification Exam. This exam features 100 questions designed to test you on your knowledge of mutual funds, investor guidelines and regulatory requirements. Upon completing the NISM Series V-A: Mutual Fund Distributors Certification Exam, you will be awarded a passing certificate.

• Step 3: Register with the AMFI 

Now that you have the certificate, the next step is to register with the AMFI and obtain an AMFI Registration Number (ARN). The registration process is paperless and can be completed online within just a few minutes. Here is a quick overview of the ARN registration process.

• Step 1: Visit the official website of AMFI and click on the Distributor Corner link.
• Step 2: Click on the ‘Online Registration and Renewal of ARN & EUIN’ option.
• Step 3: Click on the ‘Register on AMFI’ tab.
• Step 4: Select the application type, category and sub-category.
• Step 5: Enter your PAN, mobile number and email address in the respective fields.
• Step 6: Click ‘Get Started’.
• Step 7: Complete the rest of the application process to get your ARN.

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• Step 4: Empanel with AMCs

Once you obtain your ARN, you must empanel with asset management companies (AMCs). Fortunately, there is no limit to the number of AMCs you can associate with. Empanelling with multiple different AMCs allows you to offer a wide range of mutual fund schemes to your clients and enhances your revenue stream.

With your ARN and AMC empanelment in place, you can start your business as a certified mutual fund distributor.

Conclusion 

A mutual fund distributor plays a vital role in helping investors navigate the complexities of mutual fund investments. From educating clients to helping them invest in mutual fund schemes, an MFD ensures that investors make informed decisions aligned with their financial goals.

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