What is AMFI?

Young investors (and the old timers too!) – listen up!

If you are just starting out on your investment journey or have been a veteran investor with a diverse financial portfolio, it is safe to assume that you must have come across the term ‘Mutual Funds’, at least a hundred times. And while there is a lot to unpack when it comes to Mutual Funds, today we will be focused on exploring the Association of Mutual Funds in India (i.e. the AMFI) and the role it plays in this space.

We’ll start with the first question that just bubbled up in your mind – what even is the AMFI?

 

The AMFI is a non-profit, government organization that is the prime regulator of the Mutual Fund industry, and it operates under the guidelines of the Securities and Exchange Board of India (i.e. SEBI). According to the AMFI website, the organization is –

“Dedicated to developing the Indian Mutual Fund Industry on professional, healthy, and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders.”

The key role of the AMFI includes –

  1. Implementing the rules and regulations that SEBI has put in place to safeguard the investors’ interests while facilitating growth in the Mutual Fund industry.

  2. Ensuring that the digital investment platforms are easily accessible to investors, and more importantly that these platforms are safe and secure for them to use.

  3. Maintaining transparency in every transaction in the Mutual Fund industry by ensuring the correct business practices are employed by all parties involved.

  4. Issuing the AMFI Registration Number (ARN). This is issued to an entity after said entity has proven itself credible and eligible to perform Mutual Fund trade, without hurting the investors’ interests.

We know it sounds a bit mundane, but remember how we always say you need to do your research, gather information, and then make informed investment decisions? Well, this is your information, so bear with us!

So, the AMFI is the regulator of the Mutual Fund industry in India. But – why was it set up? – what are some of its main objectives?

The AMFI has listed 8 key objectives that are the driving force of the organization. These include –

  1. To define and maintain the professional and ethical standards in each and every area of operation of the Mutual Fund industry in India.

  2. To recommend and promote a code of conduct that all members of this industry must unfailingly follow. This includes any or all agencies, organizations, and individuals who are in the field of financial services and the capital market.

  3. To represent the Mutual Fund industry in India to the government, RBI, and SEBI.

  4. To protect the interests of all investors and each stakeholder (read: Mutual Fund unit holder).

  5. To disseminate any and all relevant information about the Mutual Fund industry and carry out regular research to keep this information updated.

  6. To regulate the conduct of all distributors and be vigilant about taking disciplinary action whenever necessary. If any distributor violated the Code of Conduct, they are liable to be pulled up by the AMFI and held accountable for their violations.

  7. To undertake the task of promoting the proper understanding – of both, the concept, and the working – of Mutual Funds.

  8. To interact with SEBI and represent the industry. Simply put –

    If the Mutual Fund industry was a company, and the SEBI is a client, then the AMFI is the point of contact for the SEBI in the Mutual Fund industry.

 

It is important to know that SEBI is an umbrella organization that carries out similar functions as the AMFI, but the AMFI is an organization that operates specifically for the Mutual Fund industry. As a result, the Mutual Fund industry today is governed by regulations laid down by SEBI as well as the AMFI. This is why it is important to know about it and the securities it offers all you investors out there when you start investing in Mutual Funds.

And just as another disclaimer (you might have heard this one!) – Mutual Funds are subject to market risks. Please read the offer document carefully before investing!

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