SEBIstrikes down NOC requirement for changing MF distributors

In a move aimed at facilitating switching of distributors by mutual fund investors, SEBI said yesterday that it was discontinuing the practice of obtaining a no objection certificate (NOC) from existing distributors.

In a directive to mutual funds and asset management companies (AMCs), the market regulator said,''You are advised to ensure compliance with the instruction of the investor informing his desire to change his distributor and or go direct, without complleing that investor to obtain an NOC from the existing distributor."

SEBI said that in September 2007 mutyual fund industry body Association of Mutual Funds of India (AMFI) had mandated that AMCs would act on investor instructions if they wished to change their distributor.

The regulator noted that, "It appears that this mandate is not being followed by the mutual fund industry...Some AMCs are insisting on the investor procuring a No Objection Certificate (NOC) from the existing distributor for this switch over.''

SEBI said it had come to its notice that investors were being subjected to unnecessary hardship due to AMCs insisting on such certificates.

According to industry watchers, the decision was pro-consumer and would drive distributors to provide satisfactory after-sales services to investors, given the choice they have to switch distributors if they were not satisfied with a distributor's service.