Suppose I am a sales guy in a Bank and much more eager to reach this month’s target, suddenly I met you and sold you mutual fund products claiming high returns than any other products of this earth. But after few years you found that I am wrong and visited to bank asking me, to your surprise I left the job. What you will do?
The above scenario may happen with anybody who visit banks, corporate distributors or some brokers. Guys sitting over their are staff in guise of sales persons who are eager to sell products and meet their target rather than giving you service for which you came in. So usually you might be target to them. It happened many times that after few years you found the invested product was actually a worst product. But what solution you get from the organization from where you purchased? Their ready made answer is “guy who sold you is already left this organization”. So you don’t have any choice but to satisfy with returns and close the product. Just to avoid such bad practice, SEBI introduced EUIN (Employee Unique Identification Number).
This is the unique number allotted to employee/relationship manager/sales person of all AMFI registered mutual fund advisers. This is the unique alpha numeric code. Below is the example of Reliance Mutual Fund’s Common Application form where you get this EUIN on top of form itself.
As per claims by regulating authorities, this EUIN will actually solve the mis-selling. Because this unique EUIN will follow wherever employee goes. So one can easily track his movements too.
This EUIN will be mandatory for the transactions like Purchases, Switches, Registration of SIP/STP/Trigger STP/Dividend Sweep Plans. But EUIN will not be applicable to the transactions like installments under SIP/STP/SWP/STP Triggers, Dividend re-investments, Bonus units, Redemption, SWP Registration, Zero Balance Folio Creation and installments under dividend sweep plans.
Usually AMFI will track the movement of employee. But each employer need to inform AMFI about exit and entry of employee movement. Now will this move actually solve all the problems relating to mutual fund mis-selling by organizations or banks?
I don’t think so, because still we may find lot of loopholes in this system.
1) Banks or organizations need one more signature of investor just below ARN number of the application form to avoid entering from EUIN. The lines written over their are as below.
“I/We hereby confirm that the EUIN box has been intentionally left blank by me/us as this is an “execution-only” transaction without any interaction or advice by the employee/relationship manager/sales person of the above distributor or notwithstanding the advice of in-appropriateness, if any, provided by the employee/relationship manager/sales person of the distributor and the distributor has not charged any advisory fees on this transaction”.
So by signing over their you investor are willfully investing but not under anyone’s advice. So anything wrong in the investment will be the onus of yours not your bank or organization. Hence while investing through organizations or banks always insist for EUIN. This seems to be the major drawback of this process. As banks may easily takes one more signature and stay away from unnecessary complication in future.
2) Complaining process seems long as you need to complain to AMFI ARN Committee. Which will carry out the investigation on the matter.
3) As of now their is no clear cut information about what if employer miss the information process of employee movement to AMFI.
4) What I found as a penalty is suspension of EUIN, it means employee no longer can sell mutual fund products. Will it be a best solution to investor loss? Who still bear the loss incurred due to wrong advice? As of now no answers.
5) What if a person who is selling mutual funds in bank moved to other departments of banks? Still he will be employee of bank, still enjoys the job, still works as usual but without EUIN doing other type of businesses. So how much risky he is to other product selling? No idea 🙂
6) What if employee changed his job profile entirely? Like instead of selling mutual funds in a bank to selling of insurance products in a same bank?
7) You will not find particular employee’s track record by EUIN. So even though you are following employee but how efficient is his advice may still hidden from you.
So many question but no clarity as of now. Let us see how it unfolds in future.