Formalising an earlier decision passed by its board, SEBI on Monday released a circular fixing charges to be paid for mutual fund transactions at Rs 100 for existing customers and Rs 150 for new investors.
Acknowledging that mutual fund distributors incurred travelling and other expenses for reaching investors and procuring business, the circular allows distributors to charge Rs 100 as transaction charge for investments above Rs 10,000 for existing customers and Rs 150 for first time investors.
The circular makes it clear that the transaction charge will be deducted by the Asset Management Company (AMC) from the subscription amount and paid to the distributor and only the balance will be invested. The statement of account must then clearly state the net investment and the number of units allotted against that investment. However, the transaction charge will be at the distributor level (the distributor can opt out of taking the transaction charge) and not at the investor level, said the circular.
The circular also clarifies that the upfront commission to be paid at the discretion of the investor as per the earlier SEBI circular passed on June 30, 2009, will be continued with.
“De-duplication” of folios will also have to be carried out within a period of six months from the date of the circular.
Noting the need to regulate distributors through AMCs for protecting the interest of the investors, the circular said that due diligence is to be put in place by the AMCs, initially applicable for distributors fulfilling certain criteria (see box). Also, at the time of empanelling the distributors and during the review process, AMCs should undertake due diligence of their business model, regulatory record and organisational controls.
With respect to transparency of information, the circular mandates that fund should indicate scheme performance along with benchmark index performance. For schemes which have been in existence for three years or more, the performance for each twelve month period shall be provided.
For fund managers handling more than six funds, the AMC may disclose in the advertisement the total number of schemes along with the performance of the top three and bottom three schemes managed by the fund manager.
The disclosure of assets under management (AUM) figures by fund houses will now also include percentage of AUM by geography.