In order to improve transparency, market regulator Sebi has asked all mutual funds to disclose names of distributors, who receive commission in excess of Rs 1 crore annually, on their websites.
The fund houses, according to a Sebi circular, will have to disclose names of distributors having presence in more than 20 locations or those who have received over Rs 1 crore commission in a year. They would also have to disclose the amount of commission paid to distributors.
The disclosure, which would also be uploaded on the MF industry body AMFI's website, would be mandatory from November 10, it added.
The industry players feel that the move is aimed at tracking the payouts to big distributors like global and domestic banks and large independent financial advisors.
Distributors earn a upfront commission from the mutual funds in the first year which is generally higher for selling equity schemes and lower for debt schemes.
Further, they also earn a 'Trail Commission', which is a percentage of total business brought by the distributor. This commission is paid in the subsequent years and accounts for a huge earning for the distributors.
Securities and Exchange Board of India (Sebi) Chairman U K Sinha had earlier this year said that the regulator would take steps towards regulating the mutual fund distributors.
The Sebi board had also decided that as a first step towards regulating distributors of MFs, selected distributors will be regulated through Asset Management Companies (AMCs) by putting in place the due diligence process to be conducted by AMCs.
"Our initial attempt is to regulate the distribution industry. We tried to cover those distributors whose contribution to the industry is material. We propose to cover about 50 per cent of the asset under management (AUM) of the industry," Sinha said.
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'I made my money by selling too soon.'
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