Score wrong for the right answer in Amfi test

What is the minimum investment amount in mutual funds for which permanent account number (PAN) is to be quoted? A. Nil, B. 50,000, C. 25,000.

If you answered Nil, which is the correct answer, then you would have ended up with a negative marking in the Association of Mutual Funds in India (Amfi) Certification programme.

The Amfi test is a mandatory requirement for anyone looking to sell mutual funds in the country.

Not just this question, but there are many others — such as what is the maximum entry load that a mutual fund can charge, the maximum exit load and whether a person can change his/her mutual fund agent — where a person who answers correctly according to existing regulations would be answering incorrectly in the exam.

This is not because he is ahead of time, but because the Amfi test meant for mutual fund sellers still runs as per the rules and regulations existing in 2006-07.

Such instances of obsolete terms and rules have increased in the past year, taking into account the changes the MF industry has witnessed in 2009-10.

The Securities and Exchange Board of India (Sebi) scrapped upfront entry loads and said that commissions are to be decided by the investor.

The valuation norms for debt mutual funds have been altered, while the requirement of a no-objection certificate, which was earlier needed to change your mutual fund agent, has been abolished.

Trainers who prepare people to appear for the Amfi examination have to use a trick to ensure that they tell the trainees about existing regulations as well as the answers to be written in the
examination.

Paul D’ Souza, who conducts training programs for Amfi certification as well as knowledge updates for existing agents, said, “I train them from the exam part of it and also from the knowledge part. I have to inform them about the present issues and also what is in the syllabus on the issue.”

Sharing an instance, he said, “According to the current Sebi regulation entry load is banned, but for the examination the maximum entry load to be charged is 7%.”

Similarly, the maximum exit load is 7% from the exam point of view, but is actually a maximum of 1% now.

Examinees who write 1% in their paper will have their answer marked incorrect. “There is a 25% negative marking in the Amfi test, so you can lose your marks,” D’Souza says.

The Amfi syllabus book had a green-colour cover, which was replaced with a brown-coloured one in 2006-07.

Since then the book remains the same, say trainers.

A trainer who handles agents for leading fund houses told DNA Money, “You fail because you know too much.”

One of his students, he said, was given both the correct answer for the present regulation and the answer in the syllabus in the options for a question on short-term capital gains tax.

“He wrote the technically correct answer and lost his marks.”

“There are topics such as initial issue expenses that are redundant, while concepts like exchange-traded funds, which are a rage these days, do not find a mention in the syllabus,” said Ashutosh Wakhare, professional financial trainer and proprietor of Money Bee Institute.

Asked about the changes made in regulations in the present financial year and when they will be updated, Amfi chairman A P Kurian said, “We usually update the book every three years. It is in process.” Wakhare said, “It is a huge exercise to keep updating the entire syllabus, I am told it underway.”

But it is unlikely that the Amfi certification syllabus would see updates soon as another plan is underway.

As announced in 2008, all certification programmes for financial product intermediaries would be brought under one institution.
Various industry bodies might be working with the National Institute of Securities Markets (NISM) to have either a common programme or a new test, wherein the certification would be handled by NISM alone.

Kurian had told a gathering of distributors that the Amfi certification programme would be merged under NISM, which presently operates out of Navi Mumbai and is planning to a central institute at Patalganga.

When contacted, Professor G Sethu, who spearheads NISM operations, was unavailable for comments.