SEBI introduces transaction charges for MF investors

In an effort to incentivise the mutual fund distributors who had been left in the lurch after the entry-load ban in August 2009, SEBI has introduced transaction charges on investments in mutual funds.

For investments above Rs 10,000 in mutual funds, an investor will now be required to pay Rs 100 for each such transaction. In the case of a new mutual fund account being created, there will be a transaction charge of Rs 150 on the investor. No transaction charge will be imposed on investments below Rs 10,000, said SEBI Chairman, Mr U K Sinha at a press conference on Thursday.

‘small step'

While the mutual fund houses are calling it a ‘small step' in the right direction, distributors are of the opinion that this incentivisation may not be good enough. “This is not a significant measure as most of the investments will be below the Rs 10,000 mark,” said Mr K Venkitesh, National Head — Distribution, Geojit BNP Paribas Financial Services.

In other measures taken for the industry, the SEBI board has asked for higher disclosure by the Asset Management Companies (AMCs). Fund houses will now have to provide Assets Under Management data with a break-up of the debt, equity and balanced AUM. The scheme's performances will now have to be benchmarked against the Sensex or the Nifty in the case of equity schemes, and against the Government of India debt paper, in the case of the debt schemes, in addition to scheme's own benchmark.

The regulator is also looking at tighter regulations for the distributors of mutual funds. The initial focus of this regulation will be on the larger mutual fund distributors. It is estimated that this measure will cover distributors handling about half of the total AUM in the industry, said a press release from SEBI.

SEBI has also directed fund houses to send a common monthly account statement to the investors who transact in any one of the folios of the funds and a common half-yearly account statement for all non-transacted folios. The common account statement will include information on the transaction charge paid to the distributor.

Simple KYC

In a move towards simplification of the KYC process, the SEBI Board has passed a proposal of setting up a mechanism wherein one or more SEBI regulated KYC Registration Agencies (KRAs) will undertake KYC at the stage of account opening for all clients in the securities market through SEBI regulated agencies.

The Unique Identification Document or Aadhaar number will be included in the eligible documents that can be presented as an identification of the customer, as part of the KYC process, said the release. The KRAs would all be inter-linked and secure data transmission link with each intermediary that relies upon its data.

The benefits of a KRA system include the execution of a single and uniform KYC procedure across the securities market, saving of record keeping space, centralised storage and dissemination of data and saving the time and burden of procedure for clients by undertaking this procedure of identification only once, subject to periodic update, added the release.

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