Market regulator Sebi on Monday said new investors will now have to pay an extra Rs 150 for investment of Rs 10,000 and above in mutual funds, while the charge will be Rs 100 for existing investors.
"In order to enable people with small saving potential and to increase reach of mutual fund products in urban areas and smaller towns, it has been decided that a transaction charge per subscription of Rs 10,000 and above be allowed to be paid to distributors," Sebi said in a circular. Investors are already paying a commission in some cases, besides up to 2.5% of their investment towards expanses of fund management. Now the distributors would be allowed to charge Rs 100 as transaction charge per subscription. No charge can be made for investments below Rs 10,000. "As an incentive to attract new investors, the distributor may be paid Rs 150 as transaction charge for a first time investor in mutual fund," the circular added.
For systematic investment plans (SIPs), the transaction charges can be recovered in 3 or 4 installments, it added. Sebi further said that the investors would continue to pay upfront commission directly to distributors. Last month, Sebi chairman U K Sinha had said that transaction fee is some way to compensate the distributors, who may have lost interest in the distribution of mutual fund products.
Experts said this move is seen as back door imposition of entry load, a fee charged to the investors at the time of their investment in a MF scheme. MF distributors had been demanding re-introduction of entry load, which was abolished by Sebi in 2009. Then the board was headed by C B Bhave. Distributors have been complaining that their business has taken a hit since then.
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