Get that certificate

The Securities And Exchange Board of India (SEBI) has made it mandatory for those engaged in marketing and selling mutual funds products to obtain a certificate from the National Institute of Securities Market (NISM), a trust formed by the regulator. Companies engaged in equity-related products, too, have to get their employees registered.

For now, many relationship managers of brokerages selling mutual funds lack AMFI certification. A CEO of a domestic mutual fund, who did not want to be named, says: “More than 50 per cent of individuals selling mutual funds are not AMFI-certified. It’s a humongous task to keep a check on everybody selling mutual fund products.

The regulator has taken the right step as the industry will never come forward to take the responsibility on its own.” An ex-employee of a domestic brokerage, who held the position of a relationship officer, told Business Today: “We had only two AMFI-certified persons in our branch office, but all of us used to market mutual funds products to investors. During new fund offers (NFOs), there was no choice but to ask everyone to market the fund to investors.”

Industry experts feel this is one reason for SEBI to initiate a certification programme for all market intermediaries. Speaking to the media in December, M. Damodaran, Chairman, SEBI, said: “From now on, all persons directly or indirectly associated with the securities market will have to obtain certificates from the regulator to conduct business in the securities market. This will demonstrate the minimum proficiency standard of the individual as well as tell investors that the people who they deal with have appropriate knowledge, a certain minimum level of education and behavioural standards to do the job.”

This certification will cover stock broking firms, stock dealers, foreign institutional investors, mutual funds managers, portfolio managers, and those involved in the distribution or marketing of equity-related products. As of now, apart from the AMFI certification designed for mutual funds distributors, only stock dealers and brokers undergo a certification programme designed by the exchanges—the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

The certification has to be obtained by passing an examination approved by SEBI, which will be conducted by NISM from time to time. The certificate will be valid for three years. Subsequently, people will be required to undergo training programmes or re-appear for the certification programme to maintain its validity. Once the regulation is passed, people related to the securities market will need to pass the test within two years while new employees have to get certified within a year. Besides conducting examinations, NISM will also act as a central registry and maintain a database of certified persons working on the stock market.

However, there has been mixed reactions from the industry. A senior market player, who did not want to be quoted, says: “For qualified people who have already done financial management and have learned securities analysis, there is little value addition. Secondly, will the certification help someone to make profits for his clients?” But there are many others who have welcomed the move. Says Ved Prakash Chaturvedi, MD, Tata Mutual Fund: “It helps me to set an example for my employees who will now be encouraged to pass the test,” he says. “Today, everyone in my office is AMFI-certified. Apart from certification, it gives them knowhow of the product as well as the industry.”

Individuals seeking the right information— and product—will now have the assurance that people they’re dealing with are qualified. It will set a new qualification benchmark for the industry—and it bodes well for you.

— Mahesh Nayak