The Hindu Business Line : No entry fee for direct applicants in MFs mooted

Mumbai, Aug. 22 The Securities and Exchange Board of India proposes to waive the ‘entry load’ for investors making direct applications in mutual fund schemes.

Entry load is a specific upfront fee charged from investors in mutual funds.

SEBI said direct applications include the ones received through the Internet, submitted to AMC or collection centre or Investor Service Centre and are not routed through any broker, distributor or agent.

Currently, all investors irrespective of the mode of entry are required to pay the entry load. Most AMCs charge around 2.25 per cent for investments below Rs 5 crore, while the maximum permissible limit is 6 per cent.

Analysts said the move would help the informed investors who did not require the advice of the distributor chain.

“It is a welcome initiative from SEBI. However, it is meant for only those investors who have a clear understanding of mutual funds and can take their own decisions,” said Mr A. P. Kurian, Chairman, Association of Mutual Funds in India. AMCs were of the view that the proposal will help in reducing mis-selling of funds by distributors as the investor now has an incentive to invest through other channels.

“It is not a bad move and the distributor can never take the investor for granted,” said Mr Sanjay Santhanam, Vice-President – Sales and Marketing, Sundaram BNP Paribas Mutual Fund.

SEBI has ordered that the loads collected by the asset management companies for each scheme should be maintained in a separate account and be utilised towards meeting the selling and distribution expenses.

As the amount collected through the direct route accounts for only 5-10 per cent of the total amount collected in a fund, the AMCs will not be hit by the move, said fund houses.

“The volume of investments through the direct route is very less and hence it would hardly affect the AMC’s expenditure on marketing,” said Mr Santhanam.

Mr Jaideep Bhattacharya, Chief Marketing Officer of UTI AMC, said that each channel provided value to the sales penetration and reach of AMCs and hence the commission charged by distributors was not incorrect.

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