Mutual fund investors can look forward to a lot more information about how their investments are managed by fund houses in the next financial year, although fund houses themselves aren’t too thrilled about this.

Capital market regulator SEBI has asked asset management companies to inform investors how much commission they have paid to their distributors, that is, your investment advisor, to sell you a particular scheme. Mutual funds will also have to disclose on their website the total remuneration they pay their senior executives, particularly C-suite officers, senior fund managers and any employee whose annual remuneration exceeds ₹60 lakh a year.

While the disclosure on commissions will have to be done starting October, the companies will have to give details of the salaries paid from April 1 onwards.

In the consolidated account statement (CAS) issued to investors, mutual funds will soon have to provide the total purchase value or cost of investment in each scheme for the investor and the “amount of actual commission paid by AMCs/mutual funds (MFs) to distributors (in absolute terms)” at the end of every September and March.

Commission defined Additionally, SEBI has defined ‘commission’ not just as direct monetary payments but also payments made as gifts/rewards, trips, and event sponsorships. The CAS should also disclose the scheme’s average total expense ratio (the total cost to the investor) in percentage terms for the half-year period, of both direct and regular plans. (A direct plan is where an investor buys his scheme straight from the company, circumventing a distributor.)

Currently, a CAS only gives information about the name of the scheme/s where the investor has invested, the number of units held and their present market value.

Towards transparency This move by the regulator is part of SEBI Chairman UK Sinha’s attempts to make the mutual fund business more transparent for investors and keep domestic regulations in line with those in developed markets.

However, a senior industry official, who did not want to be named, said that the Indian mutual fund market is still in too nascent a stage to disclose commissions. “Look at insurance: policy-buyers sometimes ask agents to pass on a part of their commissions to them. If MF investors too start asking for such kickbacks, the profession will become even more unviable for new entrants,” he said.

While the information on salaries will help investors gauge if fund performance justifies how much these funds pay their investment managers, CEOs fear that this move by SEBI will eventually lead to a ceiling on C-suite remunerations in an industry where remunerations go up to ₹5 crore a year.

“As the CEO of a private AMC, I know I’m an interested party in this debate,” a senior industry executive told BusinessLine , “but I don’t want the regulator to fix my salary.”

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