AMFI Code of Ethics
Also written ACE · AMFI Code of Ethics (ACE)
AMFI's code of good practice for AMCs and trustees, drawn up to supplement the SEBI code of conduct in the Fourth Schedule and set more explicit standards, from integrity to enforcement.
In plain language
SEBI's mutual fund regulations already require every Asset Management Company and trustee to follow a Code of Conduct in the Fourth Schedule to the SEBI (Mutual Funds) Regulations, 2026. That code lays down broad principles.
The AMFI Code of Ethics (ACE) sits on top of it. The workbook: it sets out the standards of good practices to be followed by the Asset Management Companies in their operations and in their dealings with investors, intermediaries and the public. It was drawn up to supplement that schedule, to encourage standards higher than those prescribed by the Regulations, and sets more explicit standards for AMCs and Trustees.
How it works
The ten sections, in order.
| # | Section | Examples of what it requires |
|---|---|---|
| 1 | Integrity | Schemes run in the interest of all classes of unit-holders — not sponsors, directors, trustees, brokers, associates, or a special class of unit-holders |
| 2 | Due diligence | High service standards, independent professional judgement, adequate resources |
| 3 | Disclosures | Portfolio details, expense ratios and portfolio turnover annually; deals with associates or significant unit-holders reported to trustees with a fairness justification; key personnel's trades disclosed to the compliance officer at least half-yearly |
| 4 | Professional selling practices | No exaggerated performance claims; do not present a scheme as a new share issue; no guaranteed returns except as stated in the SID |
| 5 | Investment practices | Manage schemes per the SID's fundamental investment objectives and policies; no buying or selling with the AMC's or trustee company's directors, officers or employees |
| 6 | Operations | No front running, no self-dealing; no false markets or price rigging; no change in fundamental attributes without prior unit-holder approval except when caused by regulation; avoid excessive concentration with a broker |
| 7 | Reporting practices | Standardised valuation; uniform performance reporting on total return; scheme-wise segregation of cash and securities |
| 8 | Unfair competition | Nothing harmful to other members |
| 9 | Observance of statutes | Letter and spirit |
| 10 | Enforcement | Code a condition of employment; each employee signs for it; a designated compliance person; half-yearly and annual reports to trustees; records kept at least three years |
Definitions (section 11). A significant unit-holder is any entity holding 5 percent or more of the total corpus of a scheme, including entities it controls. Front running is dealing ahead of the fund with non-public, material information; self-dealing is using one's position to benefit unfairly at the expense of the fund.
A difference to notice. ACE 6.7 speaks of prior approval of unit-holders for a change in fundamental attributes. The SEBI provisions in Chapters 5 and 10 instead require written communication and an exit option at NAV without exit load. Know which document says which.
A worked example
A debt scheme has a corpus of Rs 800 crore. Figures are illustrative; the rules are ACE's.
Significant unit-holder. A corporate treasury holds Rs 44 crore in the scheme, and a subsidiary it controls holds another Rs 6 crore.
Combined holding = 44 + 6 = Rs 50 crore
Share of corpus = 50 ÷ 800 = 6.25% (threshold: 5% = Rs 40 crore)
It is a significant unit-holder — the subsidiary counts because it is controlled.
A transaction with it. The scheme buys Rs 25 crore of commercial paper issued by that same company. Under ACE 3.3 the AMC must submit the details to the Board of Trustees with a justification of fairness to the scheme, and disclose the transaction in brief in the annual and half-yearly reports.
A fund manager's own trade. The scheme's dealer buys shares personally. Under ACE 3.4 it goes to the compliance officer at least half-yearly, and on to the trustees if it conflicts with the fund's transactions. Had he bought a bond just before placing the scheme's large order for it, that would be front running.
All of it must be kept on record for at least three years.
Why NISM asks about it
Chapter 10.3.1 (AMFI Code of Ethics) reproduces the code in full. Expect questions on who it applies to (AMCs and trustees, not distributors), what it supplements (the SEBI Code of Conduct in the Fourth Schedule), the 5 percent significant unit-holder definition, three-year record keeping, half-yearly reporting to trustees, and the definitions of front running and self-dealing.
Common exam traps
- ACE binds AMCs and trustees; AGNI binds intermediaries.
- ACE supplements the Fourth Schedule code; it does not replace it, and it aims higher than the regulations.
- Significant unit-holder: 5 percent or more of the corpus, counting controlled entities.
- Records: at least three years. Reports to trustees: half-yearly and annually.
- Performance is reported on a total return basis.
- ACE 6.7 says prior unit-holder approval for fundamental attribute changes; the SEBI rule in Chapter 10 is notice plus a no-load exit option.
Where this is taught
- Series V-D · Chapter 4: Legal and Regulatory Frameworkintroduced here
- Series V-B · Chapter 10: Legal and Regulatory Environmentintroduced here
Related terms
- Front runningUsing non-public knowledge of a substantial impending order to trade ahead of it in the same or related securities or derivatives, expecting the price to move once the order becomes public.
- AMFIThe Association of Mutual Funds in India — the association of all registered AMCs, which registers distributors through the ARN and sets codes of conduct, but is neither a regulator nor a self-regulatory organisation.
- Asset Management CompanyThe company that runs a mutual fund's schemes day to day — appointed by the sponsor or trustees with SEBI's approval, and paid a fee out of the scheme rather than a share of its profits.
- TrusteesThe guardians of a mutual fund trust, who hold its property for the unitholders and oversee the AMC — at least two-thirds of them independent, each approved by SEBI in advance.
- AGNIAMFI Guidelines & Norms for Intermediaries — the code of conduct for agents, brokers, distribution houses and banks selling mutual funds, enforced by warning and then cancellation of AMFI registration.
- Fundamental attributesThe core features of a scheme — its investment objectives, policies and terms — on which investors relied when they invested. Changing them requires notice to every unit-holder and a no-load exit at NAV.
- Investment policyHow a scheme will achieve its investment objective, disclosed in the SID through exactly two aspects: its asset allocation and its investment style.
- Self-dealingUsing your position inside a fund house to transact with the fund itself on terms that benefit you unfairly, at the expense of the scheme and its unit holders — banned outright by the AMFI Code of Ethics.
- Significant Unit holderUnder the AMFI Code of Ethics, any entity holding 5 per cent or more of a scheme's total corpus, counting everything it controls — so its dealings with the scheme must be justified to the trustees.
- Unit Holder Protection CommitteeA committee every AMC must constitute under the SEBI Mutual Fund Regulations, 2026, whose sole remit is the interests of unit holders across all the AMC's products and services.