AMFI Code of Ethics (ACE)

The AMFI Code of Ethics (ACE) is the principles-based statement of ethical obligations that all members of the Association of Mutual Funds in India (AMFI) – comprising every SEBI-registered asset management company (AMC) – must observe in their conduct towards investors, the regulator, and the public. It also applies to authorised distributors holding valid AMFI Registration Numbers (ARNs) by virtue of the terms of the ARN registration agreement. The ACE was first codified in the early years of AMFI’s operation and has been updated at intervals as the industry and its regulatory environment evolved.

The ACE functions as a companion to the AMFI Best Practice Guidelines (BPG): the ACE articulates values and principles in broad terms, while the BPG translate those principles into specific procedural requirements, prohibited practices, and disclosure obligations. Together they constitute the self-regulatory framework through which AMFI governs conduct in the mutual fund industry.

Structure and scope

The ACE is structured around five foundational principles, each supported by specific behavioural expectations:

1. Integrity: Members must act with honesty, transparency, and fairness in all dealings with investors, regulators, and the public.
2. Competence: Members must maintain professional knowledge and skills, and must not hold themselves out as possessing expertise they do not have.
3. Due care: Members must act diligently and exercise appropriate care in all investment decisions and client interactions.
4. Fair dealing: Members must treat all investors fairly and without discrimination, and must not engage in preferential or insider dealings.
5. Disclosure: Members must fully and accurately disclose all material information, including risks, costs, and conflicts of interest.

The ACE explicitly applies to:

• all AMCs that are members of AMFI;
• their directors, officers, and employees who are involved in fund management, distribution, or investor services;
• all ARN-registered distributors and their employees; and
• any third party to whom an AMC or distributor delegates functions that affect investor interests.

Core obligations under the ACE

Obligation to investors

The ACE’s central obligation is that all members place the interests of investors ahead of their own commercial interests. This principle has direct operational consequences:

• AMCs must not invest scheme assets in a manner that benefits the AMC or its affiliates at the expense of unit holders.
• Distributors must not recommend schemes primarily because of the commission payable, in preference to a scheme that better suits the investor’s needs.
• The anti-churning provisions in the BPG are the operational expression of this investor-first obligation.

The ACE also requires that members respond promptly and accurately to investor queries, maintain investor confidentiality, and not use investor data for purposes beyond those consented to at account opening.

Prohibition on misleading conduct

The ACE prohibits members and their representatives from making any false, misleading, or deceptive statement to an investor, regulator, or counterparty. This encompasses:

• misrepresenting past performance by using selective time periods;
• implying or stating that returns are guaranteed;
• using disclaimers in fine print to contradict materially misleading headline claims;
• misrepresenting the risk profile of a scheme, for example describing a credit-risk fund as “low risk”; and
• making claims about rankings or awards that are unverified, out of date, or misleading in context.

Conflicts of interest

The ACE requires members to identify, disclose, and manage conflicts of interest. Specific scenarios addressed include:

• AMC-distributor conflicts: where an AMC distributes its own schemes through its own distribution arm, it must ensure that the arm does not recommend the AMC’s schemes to the exclusion of competitors’ schemes where competitors’ schemes better suit the investor’s profile.
• Related-party transactions: AMCs must disclose and obtain board approval for any scheme investments in securities issued by group companies of the sponsor, subject to the AMFI Group Company classification and SEBI’s exposure limits.
• Personal trading: Fund managers and other investment personnel are subject to pre-clearance requirements and hold periods for personal transactions in securities that their funds also hold, to prevent front-running.

Regulatory compliance

The ACE obliges all members to comply with all applicable laws, regulations, and circulars from SEBI, AMFI, and other regulators. Members must not engage in regulatory arbitrage or attempt to achieve through indirect means what is prohibited directly. Compliance officers of AMCs are specifically required by the ACE to be empowered with independence to raise compliance concerns without commercial pressure.

ACE and investor grievances

The ACE requires AMCs and distributors to handle investor grievances in good faith, promptly, and without prejudice. This obligation is operationalised through the AMFI investor grievance escalation matrix and the AMFI Best Practice Guidelines on grievance resolution timelines.

Where an investor’s complaint reveals a systemic issue – for example, a pattern of mis-selling by a distributor – the ACE obliges the AMC to escalate the matter to AMFI and, where appropriate, to SEBI’s SCORES platform, rather than resolving the individual complaint in isolation without addressing the broader conduct problem.

ACE and the AMFI Advertisement Code

The AMFI Advertisement Code is an operationalisation of the ACE’s principle of accuracy and full disclosure as applied to mass communications. All advertising by AMCs and distributors must comply with the Advertisement Code, which is itself grounded in the ACE’s general prohibition on misleading conduct and its requirement for balanced risk disclosure.

Enforcement of the ACE

AMFI does not have direct statutory enforcement powers. The ACE is enforced through the following mechanisms:

1. Contractual obligation: AMC membership of AMFI requires acceptance of the ACE as a binding condition. ARN registration requires the distributor to sign a declaration of compliance with both the ACE and the BPG.
2. AMFI Distributor Affairs Committee: Reviews complaints against distributors and may issue warnings, suspend ARNs, or recommend ARN cancellation.
3. SEBI referral: Where an ACE violation involves fraud, systemic harm, or regulatory breach, AMFI refers the matter to SEBI for action under the SEBI Act or the Mutual Funds Regulations.
4. Reputation mechanism: AMFI publishes enforcement actions on its website, providing a public record that affects the professional reputation of both AMCs and distributors.

The ACE’s enforcement architecture is widely acknowledged to have limitations. Because AMCs govern AMFI through the board structure, serious enforcement actions against large AMCs or their distribution affiliates require SEBI’s direct involvement to be credible. SEBI has issued its own orders against AMC employees, fund managers, and distributors in cases involving front-running, insider trading, and systemic mis-selling, often citing ACE violations as part of the grounds for the action.

ACE obligations in scheme management

The ACE’s obligations extend specifically to the investment management function performed by fund managers and the AMC’s investment team. The principle of due care requires that:

• investment decisions are made solely on the basis of scheme investment objectives and the interests of unit holders, and not on the basis of the AMC’s own commercial interests or the sponsor’s business relationships;
• fund managers do not participate in portfolio decisions involving securities in which they hold a personal financial interest, without pre-clearance;
• the AMC maintains a Chinese Wall between its fund management activities and any other business activities of the sponsor group (securities broking, investment banking, insurance, banking) that could create informational asymmetry;
• performance attribution and reporting to investors accurately reflect the contributions of market factors and fund manager decisions, without selective presentation.

Front-running – the practice of trading for a fund manager’s own account ahead of large trades in the managed portfolio – is treated as a serious ACE and regulatory violation. SEBI has pursued enforcement actions against individual fund managers for front-running under both the ACE framework and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003.

ACE and the trustee’s oversight role

The ACE is relevant not only to AMC employees and distributors but also to trustees of mutual fund trusts. Each mutual fund operates through a trust structure with a trustee company (or board of individual trustees) that is legally responsible for the welfare of unit holders. The ACE obliges trustees to:

• independently review AMC conduct and ensure that the AMC is functioning in the best interests of investors;
• report to SEBI if they find evidence of ACE violations by the AMC that the AMC has not rectified;
• ensure that the AMC’s conflict-of-interest policies, personal trading codes, and related-party transaction policies are adequate and enforced; and
• not allow their own commercial interests (trustees are often executives of the sponsor) to influence their independent oversight role.

SEBI’s enforcement record includes cases where trustees were found to have been insufficiently independent in their oversight, leading to regulatory directions requiring trustee governance improvements.

ACE alignment with SEBI’s investment adviser regulations

For distributors who also provide incidental investment advice (rather than purely transactional distribution services), the ACE provisions on suitability and conflict of interest must be read alongside SEBI’s (Investment Advisers) Regulations, 2013. Where the line between advice and distribution is crossed without the distributor holding an RIA registration, both ACE violations and regulatory breaches may arise. AMFI’s BPG explicitly direct distributors to be clear with investors about whether they are acting as a distributor (transactional) or an adviser (fiduciary), and to obtain the appropriate registration for any advisory services provided.

Updates and current edition

The current edition of the ACE is available as a PDF on the AMFI website at amfiindia.com under the “Resources” and “Codes and Guidelines” sections. AMFI updates the ACE through circulars that amend specific provisions rather than through complete editions. Practitioners are advised to cross-reference the base ACE document with the chronological list of amending circulars to identify the current state of any particular provision.

See also

• Association of Mutual Funds in India (AMFI)
• AMFI Best Practice Guidelines
• AMFI Registration Number (ARN)
• AMFI Advertisement Code
• AMFI investor grievance escalation matrix
• AMFI Group Company classification
• Employee Unique Identification Number (EUIN)
• Securities and Exchange Board of India (SEBI)

References

1. AMFI. “AMFI Code of Ethics.” amfiindia.com. Accessed 2026.
2. AMFI. “Best Practice Guidelines – Compilation.” amfiindia.com. Accessed 2026.
3. SEBI. Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
4. SEBI. “Enforcement actions in the mutual fund sector 2020-2025.” sebi.gov.in. Accessed 2026.
5. AMFI. “Distributor Affairs Committee proceedings summary.” AMFI Annual Report, 2024-25.
6. Aggarwal, Raj. “Self-regulation in Indian financial services: AMFI as case study.” Indian Journal of Finance (2021).