What Is the Role Of AMFI In Mutual Fund? | Association Of Mutual Funds In India

The Term “AMFI - Association of Mutual funds in India”

Non-profit AMFI is dedicated to promoting mutual funds in India and making them more prominent. This organization is in charge of broadcasting the daily NAVs of all funds, in addition to the monthly flow statistics for a variety of different types of mutual funds.

During the entirety of the process of selling mutual funds, it is also responsible for managing individual ARN registrations in order to preserve honesty, openness, and investor interest. On August 22, 1995, it was created as an organization that did not seek to profit from its activities.

Function

  • Since the beginning of the 2000s, there has been a rapid increase in the number of people investing in mutual funds in India.
  • The mutual fund sector in India currently manages Rs3.80 trillion ($500 billion) in assets as of November 2021. India has 9.78 crore mutual accounts folios, with 5 crore SIP accounts (Source: Open). 
  • Since then, MFs have become a significant part of the system. When it comes to making financial investments, there are a number of situations in which a person's savings are not put into mutual funds in the appropriate manner.
  • For the Indian Mutual Fund Industry to recover lost confidence from investors, this organization plays a key role. 
  • Those who hold positions of leadership within AMFI hail primarily from India's mutual fund sector. The purpose of educating investors is thwarted if their money is misused or if the product is unethically given to the final consumer. In the event of investor grievances or questions, AMFI helps to protect the rights of the investors.

Objective 

  • They protect the rights and interests of shareholders cum scheme investors. Investors can now file complaints or grievances with AMFI about the performance of their funds' managers or the fund houses themselves.
  • The SEBI provides AMFI with direction, and the two organizations collaborate closely on matters relating to mutual funds.
  • They act as the official representatives of the government, the Ministry of Finance, the Reserve Bank of India, and SEBI in all matters concerning the mutual fund business.
  • Guarantees that the management of mutual funds is conducted in accordance with a consistent set of ethical and professional standards.
  • Research and workshops on various types of mutual funds are also part of the AMFI's responsibilities, as is the distribution of such information. In addition to that, they run a countrywide initiative to raise investor education.
  • For mutual funds, AMCs and other service providers, AMFI also encourages them to adhere to the criteria once they've been established.
  • Asset Management Companies' rights are likewise protected by them.
  • Additionally, they help all the stakeholders in the supply chain to adhere to its rules and regulations, including distributors, financial advisors, agents, and asset management organizations. Disciplinary measures are taken when a practitioners breaches the standard of ethics.

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NAV - Net Asset Value 

As a part of its role as an AMFI, the AMFI distributes all mutual fund NAVs and monthly flow statistics. In addition to this, it takes care of the ARN registrations for private investors, making certain that the honesty, openness, and protection of the investors' interests are maintained throughout the entire process of selling mutual funds.

In layman's terms, the net asset value (NAV) refers to the cost of purchasing units in the mutual fund scheme.

  • The Net Asset Value of the mutual fund scheme is equal to the total market value of all of the securities it holds (NAV). As a result, the NAV, also known as the net asset value, is the metric that is utilized in order to evaluate the performance of a mutual fund scheme. 
  • It's possible to determine the NAV per unit of a mutual fund by dividing its current market value in securities by its total number of units outstanding at any given time.

What Role Does NAV Play in Investment Decisions?

  • Net Asset Value isn't the only factor to consider when deciding on which mutual funds to invest in. If the NAV is lower, it does not necessarily mean that the mutual fund is inexpensive or that the investor is in a better position since they purchased the fund at a cheaper price or lower NAV. 
  • This has nothing to do with the market price of publicly traded stock .This just displays the value of the units at the present time. 
  • The longer the scheme has been in existence, the higher its Net Asset Value reflects the scheme's success. A higher NAV indicates an investor receives fewer units, while a lower NAV means more units.

Importance of ARN Number

  • To sell mutual funds, an AMFI registration number or ARN must be obtained by a fund manager, broker, or agent in order to do so legally. In order to market mutual funds, the company must have an AMFI ARN. 
  • The ARN license is required for anyone who wants to sell or propose mutual funds to investors. AMFI reserves the right to revoke the ARN license in any one of if ethical and obligatory standards are not being followed.
    • A breach of the code of conduct may be grounds for disciplinary action. 
    • There is a claim of negligence lodged, which is subsequently validated by a consumer forum.
    • A major infringement is committed by the registered entity.

Key takeaway

Mutual funds in India aren't regulated by the Association of Mutual Funds in India (AMFI). As a result, it seems more like an oversight committee, making sure that no misrepresentation is made when selling mutual funds. We sincerely hope you enjoyed reading this article and will put what you've learned here into action.

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