Last Updated on May 24, 2022 by Anjali Chourasiya
A regulator is one who creates rules and regulations, handles disputes, provides guidelines, monitors day-to-day functioning, and avoids discrepancies. Stock markets have the Securities Exchange Board of India (SEBI) as a regulator. Analogous to SEBI for stock markets, mutual funds have the AMFI. AMFI full form is Association of Mutual Funds in India. Let us examine in detail what it is, the different roles of AMFI, and what it aims to achieve.
Table of Contents
What is AMFI?
The Association of Mutual Funds in India is the authority that sets all guidelines related to mutual funds, AMCs, investors, and any other registered entity or persons linked with buying, selling, or managing mutual funds in India. It also ensures that all the guidelines are strictly abided by and swift coordination is maintained between asset management companies, stock exchanges, and SEBI.
Purpose of AMFI
To tackle unbacked myths and rumours circulating in the market and establish a robust system for mutual funds, AMFI was founded on 22 August 1995. It has, since then, successfully achieved its objectives, leading to significant growth in the mutual fund industry over the past years.
Roles of AMFI
One of the key roles of AMFI is safeguarding the needs and interests of investors. It incorporates policies and rules so that investors do not face any discrepancy while buying or selling the mutual funds. It also monitors the transactions to prevent exploitation of the investors at the time of redeeming their profits.
AMFI also ensures that all the transactions happening are transparent. It closely monitors the figures during transactions, sources of funds, and ensures proper documentation from both parties.
It also acts as a marketing channel by attracting new investors. It has been making continuous efforts since its incorporation to make mutual funds more accessible for an investor. The pragmatic shift of the mutual fund industry to major online platforms can be considered a giant step in growing the mutual fund industry.
AMFI also ensures that every party involved in the mutual fund business is an authorized person/entity. This is done by making it mandatory for all the AMCs, advisors, intermediaries, investors, and other concerned individuals to get themselves registered compulsorily before initiating any sort of trading.
AMFI is also responsible for creating all the rules and regulations and promoting the best business practices in the field of mutual funds. It has a panel that discusses, testifies, and then implements various rules and regulations to ensure smooth business practices.
Objectives of AMFI
AMFI has some pre-defined goals and objectives. Let us take a look at what these goals and objectives are:
- AMFI aims to set uniform, professional and ethical standards across all dimensions of the mutual fund industry. This is to maintain the trust of the fund houses, trustees, and individual investors towards mutual funds. This is also done towards promoting good trade practices in the nation.
- It aims to ensure that businesses and individuals adhere to the guidelines regulated by it. All the guidelines, rules, and regulations must be abided by in due course of business.
- AMFI works in coordination with SEBI to ensure that the stock markets and the related mutual funds work hand-in-hand. This coordination also involves abiding by the guidelines set by SEBI.
- AMFI also aims to spread as much awareness as possible regarding the risks involved while investing in mutual funds. It uses various media such as television ads, social media, events, etc., to spread awareness about various myths that make people believe that mutual funds do not involve risks or give extraordinary returns.
- AMFI makes representations to various financial organizations, such as the Securities Exchange Board of India (SEBI), Reserve Bank of India (RBI), finance ministry, and other money market-related organizations, to a common individual.
- AMFI works towards spreading awareness about various upcoming schemes. It again uses various media channels to achieve this goal.
- AMFI has created portals and grievance management services for investors and AMCs. This is to solve problems in case any discrepancies arise.
To ensure maximum efficiency and security, AMFI has created various committees. Here is a list of the various committees that work under AMFI.
Committees under AMFI
Committee on operations and compliance
This committee has the task of looking over all the legal matters related to the organization. It makes sure that all the operations within, or related to, the organization are within the legal boundaries, and there is no conflict with any other law-making body.
Committee on Valuation
The committee makes suggestions on the various investments being done by AMFI. It also helps in cross-checking the valuation of different AMCs.
Committee on Financial Literacy
This is the committee that has the task of spreading awareness about various risks involved in investing and the upcoming schemes related to mutual funds, which may be of interest to investors.
Committee on Registration of Certified Distributors
This committee assists AMFI in getting all the distributors and AMCs registered. It is mandatory for mutual funds, fund houses, advisors, distributors, trustees, and agents to get themselves registered with AMFI.
AMFI registration number or ARN is a one-of-a-kind number dispensed to shared asset specialists, merchants, and intermediaries who clear a certain set of exams.
Thus through its various committees, AMFI ensures complete support and protection to intermediaries involved in any mutual fund transaction.
Conclusion
Like every other industry, mutual funds also have a regulating authority called the Association of Mutual Funds in India (AMFI). It acts as the central regulating body for the mutual fund industry. AMFI also safeguards the interests of all investors and AMCs by ensuring that guidelines are strictly abided by. It uses various media channels to spread awareness regarding mutual fund schemes that may interest investors.
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