Association of Mutual Funds in India (Amfi) has said the industry is being vilified baselessly as the segment has the lowest customer complaints in the entire financial market space, as it follows the most transparent and disclosure-based reporting. The global funds tracking body Morningstar ranks India on top of 26 countries, when it comes to regular monthly fund disclosures, according to Amfi chief executive NS Venkatesh.
Amfi gets complaints from investors as well as distributors directly and also through the regulator SEBI, he added.On the basis of the type and nature of complaints, these are broadly classified into routine and serious complaints, he said. Routine complaints include non-receipt of dividends, non-receipt of account statement, non-receipt of commission and non-updating of record.
Serious complaints are manipulation in application forms, malpractices followed in marketing units, funds and serious deficiencies in services provided by distributors, among others. Routine complaints are forwarded to the mutual fund/ distributors concerned with a request to look into the same and redress it under advice to Amfi, while in serious ones, explanations are sought within a specified time limit (normally a week and SEBI seeks it within three days from the Amfi) and then the matter is referred to Amfi's ARN (application reference number) committee, recommending appropriate action, including suspension of commission/suspension or termination of ARN etc, Venkatesh noted.
Reeling out official data from April 2017 through September 2022, the banker-turned-mutual funds expert, who took over the mantle in October 2017, told PTI that the number of complaints received by Amfi during this period was only 5,330. The period also saw industry AUM doubling to about Rs 40 lakh crore and a manifold increase in folios.
If we look at other financial markets like banking, including credit cards, insurance and stocks, the number is much larger, Venkatesh said. In the banking sector, the volume of complaints received under the ombudsman schemes/consumer education and protection cells in FY22 rose 9.39 per cent year-on-year to 4,18,184 against 3,82,292 complaints in FY21, according to the annual report of the ombudsman schemes released by the Reserve Bank.
Of these, 3,04,496 complaints were handled by the 22 offices of the RBI ombudsman, including the complaints received under the three erstwhile ombudsman schemes till November 11, 2021. Giving a break-up, Venkatesh said the April-September 2017 period saw only 373 complaints while the same through the SEBI was just seven. Of these complaints, those regarding mis-selling/complaints against distributor were just four and complaint of fraud/cheating by distributors/unfair trade practices was one during this period.
Between October 2017 and March 2018, there was a marginal increase in the number of total complaints to 405, of which 278 were filed to Amfi and the rest 27 were reported to SEBI. Of these, only three were about mis-selling, 4 complaints against distributors and just one on fraud/cheating by distributors/unfair trade practices.
Between April and September 2018, the number of complaints again rose to 485, of which 449 were reported to Amfi and the rest to Sebi. But plaints regarding mis-selling/complaints against distributors were just three and there were no complaints of fraud/cheating by distributors/unfair trade practices during this period.
Between October 2018 and March 2019, the overall complaints declined steeply to 358 of which 280 were directly reported to the Amfi and the rest to the SEBI. While there were 11 complaints in the first category, there was not a single serious complaint during this time as well.
The April-September 2019 period saw a further decline in complaints to a low of 293. But the number of complaints reported to the Sebi rose to 93. Again non-serious plaints were 11, but serious plaints also jumped to five. The period from October 2019 to March 2020 saw a further decline to 254.
However, there was a massive spike in the number of complaints to 813 during the April-September period of 2020 -- which were typically the pandemic months. But the number of non-serious complaints was only eight while that of serious plaints was only three.
However, the period between October 2020 and March 2021 witnessed a steep fall in the number of complaints to a low of 363, and there were no serious or non-serious complaints. But April-September 2021 saw a spike in complaints to 729, but those warranted attention was only three non-serious plaints and four serious ones.
The October 2021 and March 2022 period witnessed again a decline to 641, with no non-serious complaints and four serious plaints. In April- September 2022, the number declined further to 619 of which eight were serious plaints. Venkatesh has credited these improvements to a proactive SEBI as well the massive investor awareness campaigns that Amfi has been running -- which has been on a steady rise since FY17 when it held over 8,200 such campaigns, which rose to close to 9,590 in FY18, and further to close 10,150 in FY19.
Despite the pandemic, it held more than 9,260 such events in FY20, over 5,400 in FY21 and 8,426 in FY22, with the number of participants running into many lakhs each. According to Morningstar, India has topped the ranking for disclosures, such as monthly portfolio holdings disclosure, portfolio management disclosure and specifications for the simplified prospectus.
Domestic funds are required to publish fact sheets on a monthly basis. Fact sheets must carry standard performance data points and comparisons with relevant benchmarks, along with holdings information and other important data points like expense ratios, loads, fund size, and manager name and experience. The assets under management (AUM) of the 42-player mutual fund industry stood at Rs 39.46 lakh crore in February, marginally down from Rs 39.62 lakh crore in January.