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SEBI has further tightened the upfront trail commission paid to distributors for registering systematic investment plan only to first time investors.
The upfront trail commission should be up to 1 per cent payable yearly in advance, for a maximum period of three years. The upfront trail commission payment will now be restricted for SIPs of up to ₹3,000 per month, per scheme, for an investor who is investing for the first time in mutual funds, it said.
Moreover, only the first SIP purchased by the new investor should be eligible for upfronting. If multiple SIPs are purchased on different dates, the SIP in respect of which the instalment starts at the earliest date should be considered, it added.
The upfront trail commission should be paid from the AMC’s books and will be amortised on daily basis to the scheme over the period for which the payment has been made.
The upfront commission paid should also account for computing the TER (total expense ratio) differential between regular and direct plans in each scheme, it added. If the SIP is discontinued mid-way after paying the upfront commission, it has to be recovered on pro-rata basis from distributors, it said.
SEBI had earlier allowed additional total expense ratio of 30 bps for attracting retail investment from beyond top-30 cities.
It has now defined the term for ‘retail investor’ from beyond top-30 cities as one who invests Rs 2 lakh per transaction.
MFs have to disclose on a daily basis, the scheme wise TER except infrastructure debt fund schemes under a separate head — “Total Expense Ratio of Mutual Fund Schemes” on their web site and AMFI web site.
Any change in TER in a scheme due to change in AUM and any decrease in TER in a scheme due to various other regulatory requirements would not require issuance of any prior notice to investors.
SEBI had earlier mandated that no entry load on investment in schemes made after August 1, 2009. For SIPs, the above provision was made applicable to SIPs registered on or after August 1, 2009.
It has now decided to make the provisions applicable to all SIPs including SIPs registered prior to August 1, 2009.
SEBI has also decided that for a given scheme, the borrowing cost will adjusted against the portfolio yield of the scheme and borrowing costs in excess of portfolio yield shall be borne by AMC.
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