SEBI says no to ‘NoC’ – Fund houses cannot insist on no-objection certificate for change of distributor

SEBI vide circular SEBI/IMD/CIR No./ 13/187052 /2009 dated December 11, 2009 has directed AMCs to change the fund distributor of an investor on receiving an instruction from investor informing his desire to change the existing distributor. AMCs cannot compel the investor to obtain an NoC from the existing distributor for this purpose. SEBI observed that the inconsistent practices prevailing in the industry is causing hardship to investors and AMCs should stop this practice immediately.

Earlier in September, 2007 Association of Mutual Funds of India (AMFI) had directed AMCs to end the practice of insisting an NoC from the existing distributor for change of distributor. However, fund houses have ignored AMFI’s circular, saying that this is not mandated by SEBI. Now SEBI has cleared the air by clarifying that AMCs cannot compel the investor to obtain an NoC from the existing distributor.

A copy of the circular is available here.