AMFI claims 17 mutual fund distributors earn commissions in excess of Sebi limit. But is this data accurate?

A recent disclosure by the Association of Mutual Funds in India (AMFI) revealed that several mutual fund distributors (MFDs) apparently earned commissions in excess of the 2% limit imposed by the Securities and Exchange Board of India (Sebi). As per the data, at least 17 distributors had commissions in excess of the regulatory limit, raising eyebrows in the industry.

However, many distributors disputed the figures, saying their profits were within acceptable limits. One distributor clarified that the reported assets under management (AUM) figures were incorrect and all commissions received for distributing mutual funds were in compliance with SEBI regulations.

Another distributor said its commissions were well within the SEBI limit and the confusion was likely due to a recent corporate restructuring that involved the merger and demerger of several legal entities within its distribution business.

In response to Mint’s queries, AMFI said that while it consolidates and publishes data from mutual fund companies, it is not involved in their day-to-day operations and does not verify data provided by individual asset management companies (AMCs). This explanation suggests that any discrepancies in the numbers could be due to data entry or reporting issues at the AMC level.

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AMFI data, while designed to increase transparency, does not always accurately reflect actual commission earnings due to factors such as reporting errors, fund restructurings or the consolidation of multiple AMFI Registration Numbers (ARNs) within a single group. As many distributors have explained, it is possible that the data is not up to date or does not capture specific industry nuances, leading to apparent discrepancies.

The issue raises a broader question: How reliable is the data used to ensure compliance with the Sebi commission limit and what processes are in place to address potential inaccuracies? Since commission disclosures are designed to protect investors and promote fairness, it is important to ensure that the data is accurate and reflects the true state of affairs.

Why is data accuracy so important?

Accurate commission data is essential for several reasons. First, it helps maintain trust and transparency in the mutual fund industry. Distributors operate under strict regulations, including the Sebi commission cap, which is designed to protect investors from excessive charges that could erode their returns. When commission data suggests that distributors are earning more than the regulatory limit, it can lead to unnecessary scrutiny, casting doubt on the integrity of both the distributors and the regulatory system itself.

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For mutual fund distributors, incorrect data can damage their reputation. These distributors play a key role in advising and guiding retail investors, and any perception that they are violating SEBI rules can cause investors to lose confidence in them. As the backbone of mutual fund distribution in India, these companies rely on transparent practices to build and maintain relationships with investors. Publishing inaccurate or misleading data can undermine their business and lead to compliance investigations, even if the problem may simply be due to reporting errors or structural complexities.

For investors, transparent and accurate commission disclosure helps them make informed investment decisions. High commissions can reduce net returns, so it is crucial that investors trust that commission disclosures are in line with regulatory guidelines. Any perceived inaccuracies in disclosures can reduce participation in mutual funds, a key investment vehicle for millions of Indians.

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Moreover, publishing accurate data ensures that the broader mutual fund ecosystem—including distributors, AMCs, regulators, and investors—remains aligned with regulatory expectations. Errors or inconsistencies can distort the picture of how well the industry is complying with SEBI norms and potentially delay reforms or lead to ineffective regulatory responses.

As more mutual fund distributors clarify their positions, it may become apparent that discrepancies in AMFI data were the result of incomplete or outdated information. Until the process is reviewed or updated, investors may need to interpret such disclosures with caution.