Difference Between SEBI and AMFI

SEBI and AMFI are the two most important regulatory bodies in the Indian securities market. While AMFI is an industry association that focuses on representing mutual fund companies, SEBI is the overarching regulatory body governing the entire securities market in India, including mutual funds. Knowledge of the differences between SEBI and AMFI is crucial when investing in mutual funds. This article debunks the SEBI vs AMFI debate, outlining the differences between the two bodies in terms of their nature, regulatory scope, powers, and functions.

But before we review the differences between SEBI and AMFI, it's important to understand each body in detail. We cover the meaning of SEBI and AMFI in the next section. 

The Securities Exchange Board of India or SEBI is a statutory body established by the Indian government to protect the interest of investors. Founded on 12th April 1992, SEBI is responsible for regulating the Indian securities market in India by formulating regulations and guidelines that promote transparency in the market. SEBI is headquartered in Mumbai, but also has regional offices located across the country, including Kolkata, Delhi, Ahmedabad, and Chennai.

AMFI stands for the Association of Mutual Funds in India. Incorporated on 22nd August 1995, AMFI is a self-regulatory body of all SEBI-registered mutual fund houses in India. As a non-profit organisation, AMFI is committed to developing the mutual fund industry in India along professional and ethical lines. The organisation acts as a prime regulator of the MF industry under SEBI’s guidelines to protect the interest of investors and other stakeholders. Currently, AMFI has 44 members, including 42 SEBI-registered Asset Management Companies (AMCs).
 

To understand the difference between SEBI and AMFI, we need to debunk how each body operates. The next section covers the operational procedures of both these regulatory bodies in detail.

SEBI follows a corporate organisational structure, consisting of a board of directors, senior management, department heads, and various sub-departments. The hierarchical structure includes 9 designated officers, with the Chairman being appointed by the Central Government of India. One board member is appointed by the RBI, two are appointed by the Finance Department, and the remaining five are nominated by the Central Government. There are various essential departments within the organisation that manage and regulate various aspects of the Indian capital market.

AMFI works quite differently from SEBI. Unlike SEBI’s designated department structure, this self-regulatory organisation operates through committees that are dedicated to various aspects of the mutual fund industry. The Financial Literacy Committee, Risk Committee, ETF Committee, Operations and Compliance Committee, and Equity CIOs Committee are some of the important committees functioning under AMFI. These committees work on specific issues and aspects to ensure streamlined and transparent operations within the mutual fund industry. 

Both SEBI and AMFI are important regulatory bodies in the Indian mutual fund market. However, both differ in terms of their roles, responsibilities, and scope of operations. Let’s review the SEBI vs. AMFI debate in detail below:
 

1. Nature and authority - SEBI vs AMFI

SEBI and AMFI differ in terms of their nature and authority. SEBI is a statutory regulatory body established by the SEBI Act of 1992, while AMFI is a non-statutory, self-regulatory organisation created for the mutual fund industry in India. SEBI also holds the authority to regulate the entire Indian securities market, which includes mutual funds, stock exchanges, and other intermediaries. AMFI, on the other hand, operates primarily to promote ethical practices among its members, which includes SEBI-registered mutual funds. This means that the mutual fund houses issuing mutual fund schemes must adhere to both SEBI and AMFI guidelines.
 

2. Scope of regulation - SEBI vs AMFI

Scope of regulation is an important point of difference between SEBI and AMFI. SEBI is the primary regulatory body of the Indian securities market and therefore, commands a broader regulatory scope. It is responsible for overseeing and regulating all aspects and elements of the Indian stock market, including trading, listing, and other market-linked activities. AMFI’s scope is limited to the mutual fund industry in India. In other words, AMFI has a narrower regulatory scope since it's limited to the mutual fund segment of the securities market.
 

3. Functions and powers - SEBI vs AMFI

SEBI is responsible for protecting investor interests, regulating business operations in the securities market, and promoting the development of the market. As a statutory body, SEBI is vested with quasi-judicial and quasi-executive powers whereby SEBI can examine books of accounts, pass judgements, and take legal action against violators. If SEBI finds evidence of unethical practices, it can impose penalties, suspend, or even cancel registrations. Additionally, SEBI can also formulate rules and regulations pertaining to various aspects of the Indian securities market, including listing requirements, insider trading regulations, disclosure requirements, and codes of conduct.
 

AMFI, on the other hand, primarily acts as the custodian of industry standards for the Indian mutual fund industry. It ensures that members adhere to SEBI’s guidelines and helps promote ethical practices in the industry. Since the mutual fund industry is heavily dependent on online platforms, AMFI is responsible for ensuring ease of access as well as safety of the investor. AMFI can also conduct audits and inspections to ensure transparency in the industry. Apart from the regulatory functions, AMFI also conducts seminars, workshops, and programmes to promote financial literacy among investors. AMFI plays a crucial role in disseminating information through its investor education and awareness campaigns. This variance in their powers and functions is a significant difference between SEBI and AMFI.
 

4. Membership - SEBI vs AMFI

SEBI and AMFI also differ in terms of membership. Membership, as such, is not applicable for SEBI since it is a regulatory body. However, market participants like investment advisors, RTAs, and mutual fund houses must register with SEBI. SEBI has different regulations and requirements for registration. For instance, investment advisors need to obtain minimum qualifications and pass a certification examination to register with SEBI.
 

AMFI membership is mandatory for every mutual fund house, trustee, adviser, and intermediary (agent). AMFI issues specific ARNs (AMFI Registration Numbers) to eligible parties like mutual fund distributors that meet the set eligibility criteria. An ARN is a mandatory licence for any entity that wants to sell mutual fund units. A valid ARN ensures that the distributor adheres to the set industry norms and standards.
 

5. Investor protection - SEBI vs AMFI

SEBI plays a crucial role in ensuring protection of investor interests in the Indian securities market. To foster investor protection, the statutory body prohibits insider trading, checks price rigging, and promotes fair trading practices in the market. Investors can use the online SCORES platform to register grievances and complaints against SEBI-registered entities like listed companies and intermediaries.
 

AMFI sets standards for mutual fund companies to protect and promote investor interests. It also monitors compliance and offers a platform for grievance redressal where investors can lodge complaints against mutual fund houses. As a self-regulatory body, AMFI can investigate complaints against MF companies that violate standards and even revoke their membership. Additionally, AMFI also promotes investor protection with its investor education campaigns.
 

6. Regulatory framework - SEBI vs AMFI

SEBI’s regulatory framework is defined by the SEBI Act of 1992. SEBI is vested with the regulatory power to formulate rules, codes of conduct, and guidelines for market participants, conduct audits and inquiries, and regulate operations of stock brokers and merchant brokers. SEBI’s enforceable regulatory powers extend to the entire stock market, including mutual funds.
 

AMFI, on the other hand, operates within the regulatory framework set by SEBI. In other words, it focuses on ensuring compliance with SEBI’s regulations, circulars, and guidelines.

The chief objective of SEBI is to regulate the Indian securities market. As a statutory body, SEBI is vested with the responsibility of monitoring and regulating the capital market in India to protect investor interest, promote fair trading practices, and boost transparency. It focuses on creating a safe investment environment by implementing rules and regulations to minimise chances of fraudulent trading and other malpractices within the stock market. SEBI is also responsible for devising a code of conduct for intermediaries like brokers and underwriters.

The SEBI vs AMFI debate becomes clearer when we contrast the core objectives of AMFI against that of SEBI. AMFI was established with the objective of promoting investor awareness and protecting the safety of all mutual fund industry participants. Accordingly, AMFI focuses on ensuring that all mutual fund industry participants adhere to its set code of conduct. AMFI is also responsible for safeguarding the interest of AMCs. As the chief representative of the mutual fund industry, AMFI is committed to advocacy. It works closely with government bodies and regulatory agencies to ensure that the interest of all mutual fund industry participants are well-represented and protected. AMFI also works closely with SEBI, collaborating on matters like market regulation, product innovation, and investor protection. 

In a nutshell, SEBI is the primary statutory body regulating the whole Indian securities market, while AMFI is a self-regulatory body specific to the mutual fund industry. SEBI and AMFI differ in terms of their powers, functions, nature, and scope of regulation. While AMFI deals with just the mutual fund segment of the market, SEBI’s guidelines regulate all aspects of the capital markets, including MFs. Both regulatory bodies exist to promote certain common objectives like investor interest protection, boosting transparency, and creating a safe investment environment. In fact, the norms and regulations set by SEBI and AMFI have been crucial in setting a strong foundation of the Indian mutual fund industry.

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