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The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the
Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four
distinct phases
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Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and
functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets
under management.

 


 
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1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.


 
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With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian
investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund
Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also
the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was
way ahead of other mutual funds.

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In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities.
One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the
end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under
the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000
crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has
entered its current phase of consolidation and growth.

The graph indicates the growth of assets over the years.





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Intermediaries play a pivotal role in promoting sale of mutual fund schemes. AMFI has therefore taken the initiative of
developing a cadre of trained professional intermediaries. As the first step AMFI launched the certification programme
in association with NSE's Certification in Financial Markets (NCFM) in July 2000 and SEBI has made AMFI
Certification compulsory in a phased manner.

Intermediaries consisting of individual agents, brokers, distribution houses and banks engaged in selling of mutual
fund products as of now do not have any guidelines or regulatory framework relating to the business of selling Mutual
Funds. It is important and necessary that these intermediaries follow professional and healthy practices. AMFI has
therefore taken the initiative of framing a broad set of guidelines along with a code of conduct.

AMFI working group on Best Practices for sales and marketing of Mutual Funds under the Chairmanship of Shri B. G.
Daga, Former Executive Director of Unit Trust of India with Shri Vivek Reddy of Pioneer ITI, Shri Alok Vajpeyi of DSP
Merrill Lynch, Shri Nikhil Khattau of Sun F & C and Shri Chandra shekhar Sathe, Formerly of Kotak Mahindra Mutual
Fund has suggested formulation of guidelines and code of conduct for intermediaries and this work has been ably
done by a sub-group consisting of Shri B. G. Daga and Shri Vivek Reddy. On behalf of AMFI, I record our thanks and
appreciation to all the members of the working group especially Shri B. G. Daga and Shri Vivek Reddy. Both of them
have devoted considerable time and efforts in formulating AGNI.

It is our request that all the intermediaries make sincere efforts to adhere to the guidelines and the code of conduct so
that all those engaged in the business of selling and marketing of mutual fund schemes follow professional, healthy
and best practices for the sustained benefit of all concerned - investors, intermediaries and the Mutual Fund Industry
as a whole.

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1. The mutual fund industry in India started in 1964 with the formation of the Unit Trust of India (UTI).
In 1987, other public sector institutions entered this business, and it was in 1993 that the first of the
private sector participants commenced its operations
2. From the beginning, UTI and other mutual funds have relied extensively on intermediaries to
market their schemes to investors. It would be accurate to say that without intermediaries, the
mutual fund industry would not have achieved the depth and breadth of coverage amongst
investors that it enjoys today. Intermediaries have played a pivotal and valuable role in popularizing
the concept of mutual funds across India. They make the forms available to clients, explain the
schemes and provide administrative and paperwork support to investors, making it easy and
convenient for the clients to invest
3. Intermediation itself has undergone a change over the past few decades. While individual agents
provided the foundation for growth in the early years, institutional agents, distribution companies
and national brokers soon started to play an active role in promoting mutual funds. Recently,
banks, finance companies, secondary market brokers and even post offices have also begun to
market mutual funds to their existing and potential client bases.
4. It is, thus clear that all types of intermediaries are required for the growth of the industry, and their
wellbeing, quality orientation and ways of doing business will have a significant impact on how the
mutual fund industry in India evolves in the future.
2.  
 

  
   





1. Investors can purchase and sell mutual fund units through various types of intermediaries -
individual agents, distribution companies, national/regional brokers, banks, post offices etc. as well
as directly from Asset Management Companies (AMCs), including the Unit Trust of India
2. Investors of Mutual Funds can be broadly classified into 3 categories:
 i. Those who want product information, advice on financial planning and investment
strategies.
ii. Those who require only a basic level of service and execution support i.e. delivering and
collecting application forms and cheques, and other basic paperwork and post sale
activities
iii. Those that prefer to do it all themselves, including choice of investments as well as the
process/paperwork related to investments.
3. To cater to different types of investors, the Mutual Fund industry comprising of AMCs and
intermediaries at present offers the following two levels of services:
i. * 
This includes product information and advice on financial planning and investment
strategies. The advice encompasses analyzing an investor's financial goals depending
upon the segment of investor, assessing his/her resources, determining his/her risk
bearing capacity/preference and then using this information to recommend an asset
allocation/specific investment/s that are in tandem with the investor's needs. Investors
may also receive information on taxation, estate planning and portfolio rebalancing to
remain aware about the changes/developments in market conditions and adjust the
portfolios from time to time according to their needs. In such advisory services, the
emphasis is on building an ongoing relationship with the investor/s. In India, given that
mutual funds are relatively new, there is a low level of awareness amongst investors about
the working and benefits of Mutual Funds. Also, very few investors take an organized
approach to financial planning. Therefore, it is clear that the vast majority of investors
would benefit significantly from the value-added services enumerated above. (b) Basic
services:-
ii. 
This includes product information and advice on financial planning and investment
strategies. The advice encompasses analyzing an investor's financial goals depending
upon the segment of investor, assessing his/her resources, determining his/her risk
bearing capacity/preference and then using this information to recommend an asset
allocation/specific investment/s that are in tandem with the investor's needs. Investors
may also receive information on taxation, estate planning and portfolio rebalancing to
remain aware about the changes/developments in market conditions and adjust the
portfolios from time to time according to their needs. In such advisory services, the
emphasis is on building an ongoing relationship with the investor/s. In India, given that
mutual funds are relatively new, there is a low level of awareness amongst investors about
the working and benefits of Mutual Funds. Also, very few investors take an organized
approach to financial planning. Therefore, it is clear that the vast majority of investors
would benefit significantly from the value-added services enumerated above. (b) Basic
services:-
While institutions can continue to be serviced by AMCs and intermediaries, it is proposed that AMCs and the
intermediary community focus more on individual investors and take every effort to:
. Provide high quality advice and product information to such customers.
 i. Explain and position this service in such a way that clients recognize it as a specialized
and value added service, a task which may be difficult to accomplish on their own.
ii. Convince investors that the transaction and intermediation cost they are paying is justified
in lieu of the long-term benefits accruing from such counseling and guidance.
The Mutual Fund industry has to now take the more difficult but long-term sustainable route of gathering
assets from individual investors by providing them value added, financial planning services and ensuring that Mutual
Funds are an integral part of their overall portfolio. Only if this happens will AMCs and intermediaries command
higher margins and levels of profitability, and not suffer from the low margins associated with dispensing only basic
types of service/s.
While doing this, the mutual fund industry in India should take care to ensure that:
. Each investor, institutional or individual, receives the exact level of service they choose and correct
advice based on clear and concrete facts and figures. Correspondingly, the intermediation and
transaction cost investors incur should reflect the value of the service and advice they receive.
i. Mutual Funds are accurately represented and appropriately positioned to investors,
whichever channel or mode they choose to invest in. The industry should safeguard the
investor's right towards correct description of the product, good service, transparency and
ability to take informed decisions.
ii. Mutual Funds are accurately represented and appropriately positioned to investors,
whichever channel or mode they choose to invest in. The industry should safeguard the
investor's right towards correct description of the product, good service, transparency and
ability to take informed decisions.
The AMFI Certification is designed to be a professional qualification that provides intermediaries with a
thorough understanding of mutual funds and how to present them appropriately to clients. The AMFI certification is
needed both for individuals and corporate distributors. The certification is required for all individuals selling and
representing mutual funds to clients, whether they are employees of an intermediary organization or they are an
individual financial planner/agent.
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Take necessary steps to ensure that the clients' interest is protected.
Adhere to SEBI Mutual Fund Regulations and guidelines related to selling, distribution and advertising
practices. Be fully conversant with the key provisions of the offer document as well as the operational requirements of
various schemes.
Provide full and latest information of schemes to investors in the form of offer documents, performance
reports, fact sheets, portfolio disclosures and brochures, and recommend schemes appropriate for the client's
situation and needs.
Highlight risk factors of each scheme, avoid misrepresentation and exaggeration, and urge investors to go
through offer documents/key information memorandum before deciding to make investments.
Disclose all material information related to the schemes/plans while canvassing for business.
Abstain from indicating or assuring returns in any type of scheme, unless the offer document is explicit in
this regard.
Maintain necessary infrastructure to support the AMCs in maintaining high service standards to investors,
and ensure that critical operations such as forwarding forms and cheques to AMCs/registrars and dispatch of
statement of account and redemption cheques to investors are done within the time frame prescribed in the offer
document and SEBI Mutual Fund Regulations.
 Avoid colluding with clients in faulty business practices such as bouncing cheques, wrong claiming of
dividend/redemption cheques, etc.
Avoid commission driven malpractices such as:
. Recommending inappropriate products solely because the intermediary is getting higher commissions there from.
i. Encouraging over transacting and churning of mutual fund investments to earn higher
commissions, even if they mean higher transaction costs and tax for investors.
Avoid making negative statements about any AMC or scheme and ensure that comparisons if any, are made
with similar and comparable products. 3.11 Ensure that all investor related statutory communications (such as
changes in fundamental attributes, exit/entry load, exit options, and other material aspects) are sent to investors
reliably and on time.
Maintain confidentiality of all investor deals and transactions.
When marketing various schemes, remember that a client's interest and suitability to their financial needs is
paramount, and that extra commission or incentive earned should never form the basis for recommending a scheme
to the client.
When marketing various schemes, remember that a client's interest and suitability to their financial needs is
paramount, and that extra commission or incentive earned should never form the basis for recommending a scheme
to the client.
Intermediaries will not rebate commission back to investors and avoid attracting clients through temptation of
rebate/gifts etc.
A focus on financial planning and advisory services ensures correct selling, and also reduces the trend
towards investors asking for pass back of commission.
All employees engaged in sales and marketing should obtain AMFI certification. Employees in other
functional areas should also be encouraged to obtain the same certification.


 
 
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If any breach of the above Code of Conduct for intermediary is reported to AMFI by either an investor or an
AMC in writing, then AMFI will initiate the following steps:

Write to the intermediary (enclosing copies of the complaint and other documentary evidence) and ask for
an explanation within a time limit of 3 weeks.
In case an explanation is not received within the time limit, or the explanation is not satisfactory, AMFI will
issue a warning letter indicating that any subsequent violation will result in cancellation of AMFI Registration.
If there is a proved second violation by the intermediary, the registration will be cancelled and an intimation
sent to all AMCs.


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a. Members and their key personnel, in the conduct of their business shall observe high standards of
integrity and fairness in all dealings with investors, issuers, market intermediaries, other members
and regulatory and other government authorities.
b. Mutual Fund Schemes shall be organized, operated, managed and their portfolios of securities
selected, in the interest of all classes of unit holders and not in the interest of
1. Sponsors
2. Directors of Members
3. Members of Board of Trustees or directors of the Trustee company
4. Brokers and other market intermediaries
5. Associates of the Members
6. A special class selected from out of unit holders
2. ŒŒ 

Members in the conduct of their Asset Management business shall at all times
a. Render high standards of service.
b. Exercise due diligence.
c. Exercise independent professional judgment.
 Members shall have and employ effectively adequate resources and procedures which are needed for the
conduct of Asset Management activities.

3. Π
a. Members shall ensure timely dissemination to all unit holders of adequate, accurate, and explicit
information presented in a simple language about the investment objectives, investment policies,
financial position and general affairs of the scheme.
b. Members shall disclose to unit holders investment pattern, portfolio details, ratios of expenses to
net assets and total income and portfolio turnover wherever applicable in respect of schemes on
annual basis.
c. Members shall in respect of transactions of purchase and sale of securities entered into with any of
their associates or any significant unit holder.
1. Submit to the Board of Trustees details of such transactions, justifying its fairness to the
scheme.
2. Disclose to the unit holders details of the transaction in brief through annual and half
yearly reports.
d. All transactions of purchase and sale of securities by key personnel who are directly involved in
investment operations shall be disclosed to the compliance officer of the member at least on half
yearly basis and subsequently reported to the Board of Trustees if found having conflict of interest
with the transactions of the fund.
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a. Members shall not use any unethical means to sell market or induce any investor to buy their
products and schemes.
b. Members shall not make any exaggerated statement regarding performance of any product or
scheme.
c. Members shall endeavor to ensure that at all times
1. Investors are provided with true and adequate information without any misleading or
exaggerated claims to investors about their capability to render certain services or their
achievements in regard to services rendered to other clients,
2. Investors are made aware of attendant risks in members' schemes before any investment
decision is made by the investors,
3. Copies of prospectus, memoranda and related literature is made available to investors on
request,
4. Adequate steps are taken for fair allotment of mutual fund units and refund of application
moneys without delay and within the prescribed time limits and,
5. Complaints from investors are fairly and expeditiously dealt with.
d. Members in all their communications to investors and selling agents shall
1. not present a mutual fund scheme as if it were a new share issue
2. not create unrealistic expectations
3. not guarantee returns except as stated in the Offer Document of the scheme approved by
SEBI, and in such case, the Members shall ensure that adequate resources will be made
available and maintained to meet the guaranteed returns.
 4. convey in clear terms the market risk and the investment risks of any scheme being
offered by the Members.
5. not induce investors by offering benefits which are extraneous to the scheme.
6. not misrepresent either by stating information in a manner calculated to mislead or
7. by omitting to state information which is material to making an informed investment
decision
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a. Members shall manage all the schemes in accordance with the fundamental investment objectives
and investment policies stated in the offer documents and take investment decisions solely in the
interest of the unit holders.
b. Members shall not knowingly buy or sell securities for any of their schemes from or to
1. any director, officer, or employee of the member
2. any trustee or any director, officer, or employee of the Trustee Company
6.  

a. Members shall avoid conflicts of interest in managing the affairs of the schemes and shall keep the
interest of all unit holders paramount in all matters relating to the scheme.
b. Members or any of their directors, officers or employees shall not indulge in front running (buying or
selling of any securities ahead of transaction of the fund, with access to information regarding the
transaction which is not public and which is material to making an investment decision, so as to
derive unfair advantage).
c. Members or any of their directors, officers or employees shall not indulge in self dealing (using their
position to engage in transactions with the fund by which they benefit unfairly at the expense of the
fund and the unit holders).
d. Members shall not engage in any act, practice or course of business in connection with the
purchase or sale, directly or indirectly, of any security held or to be acquired by any scheme
managed by the Members, and in purchase, sale and redemption of units of schemes managed by
the Members, which is fraudulent, deceptive or manipulative.
e. Members shall not, in respect of any securities, be party to-
1. creating a false market,
2. price rigging or manipulation
3. Passing of price sensitive information to brokers, Members of stock exchanges and other
players in the capital markets or take action which is unethical or unfair to investors.
f. Employees, officers and directors of the Members shall not work as agents/ brokers for selling of
the schemes of the Members, except in their capacity as employees of the Member or the Trustee
Company.
g. Members shall not make any change in the fundamental attributes of a scheme, without the prior
approval of unit holders except when such change is consequent on changes in the regulations.
h. Members shall avoid excessive concentration of business with any broking firm, and excessive
holding of units in a scheme by few persons or entities.
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1. Members shall follow comparable and standardized valuation policies in accordance with the SEBI
Mutual Fund Regulations.
2. Members shall follow uniform performance reporting on the basis of total return.
 3. Members shall ensure scheme wise segregation of cash and securities accounts.
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Members shall not make any statement or become privy to any act, practice or
competition, which is likely to be harmful to the interests of other Members or is likely to place other Members in a
disadvantageous position in relation to a market player or investors, while competing for investible funds.

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 Members shall abide by the letter and spirit of the
provisions of the Statutes, Rules and Regulations which may be applicable and relevant to the activities carried on by
the Members.



Members shall:
. widely disseminate the AMFI Code to all persons and entities covered by it
a. make observance of the Code a condition of employment
b. make violation of the provisions of the code, a ground for revocation of
c. contractual arrangement without redress and a cause for disciplinary action
d. require that each officer and employee of the Member sign a statement that he/ she has received
and read a copy of the Code
e. establish internal controls and compliance mechanisms, including assigning supervisory
responsibility
f. designate one person with primary responsibility for excercising compliance with power to fully
investigate all possible violations and report to competent authority
g. file regular reports to the Trustees on a half yearly and annual basis regarding observance of the
Code and special reports as circumstances require
h. maintain records of all activities and transactions for at least three years, which records shall be
subject to review by the Trustees
i. dedicate adequate resources to carrying out the provisions of the Code
Œ
 

When used in this code, unless the context otherwise requires
0. AMFI
"AMFI" means the Association of Mutual Funds in India
1. Associate
"Associate" means and includes an 'associate' as defined in regulation 2(c) of SEBI (Mutual Fund)
Regulations 1996.
2. Fundamental investment policies
The "fundamental investment policies" of a scheme managed by a member means the investment
objectives, policies, and terms of the scheme, that are considered fundamental attributes of the
scheme and on the basis of which unit holders have invested in the scheme.
3. Member
A "member" means the member of the Association of Mutual Funds in India.
4. SEBI
"SEBI" means Securities and Exchange Board of India.
5. Significant Unit holder
A "Significant Unit holder" means any entity holding 5% or more of the total corpus of any scheme
managed by the member and includes all entities directly or indirectly controlled by such a unit
holder.
 6. Trustee
A "trustee" means a member of the Board of Trustees or a director of the Trustee Company.
7. Trustee Company
A "Trustee Company" is a company incorporated as a Trustee Company and set up for the purpose
of managing a mutual fund.


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