Here is a cut paste from the SEBI circular of what happened at their meet today:

In order to help Mutual Funds penetrate into retail segment in smaller towns, the distributor would be allowed to
charge Rs. 100 as transaction charge per subscription.

No charge can be made for investments below Rs. 10,000.

An additional amount of Rs. 50 can be charged to first time Mutual Fund investor.

However, there would be no transaction charge on (a) transactions other than purchases/ subscriptions relating to new inflows, and (b) direct transactions with the Mutual Fund.

For SIPs, the transaction charges can be recovered in 3 or 4 instalments. The transaction charges are in addition to the existing eligible commissions permissible to the distributors.

My comments:

The training cost of explaining this provision to distributors will be a few crores.  Definition of subscription, new fund investor, 3-4 instalments, etc. I am unable to understand, so I guess many people will not be.

First time in a particular fund or a particular scheme or in the industry?

‘Subscription’ means?

Who will collect? will the IFA have to issue a receipt?

Will the fund house collect and pay to the IFA?

Will more intelligent and evolved people like Ramesh Bhatt of IFA Galaxy and Srikanth of take the trouble of explaining it to me?

I just have to write – Ramesh, Srikant, Karvy and Cams have to implement.

God bless all of us.

Thank you SEBI, I got a post.

PS: Why is the brokerage paid not being shown as a separate expense instead of adding to the NAV? I have been asking this for 10 years…still unable to understand please.

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  1. Subra,

    I and my partner differ on the definition of a good solution. I think it is one where all parties are left happy. My rather cynical partner thinks that it is one where none of the parties are left happy.

    I think Mr. Sinha belongs with my partner 🙂

    I agree, there are more details to come, but as it stands now it is pretty clear that a) the commission will be optional (max of Rs. 100 or Rs. 150 depending on existing or new investor) and b) it will come out of the investment. That is a person investing Rs. 10,000 will see Rs. 9900 invested in their name and Rs. 100 minus service tax will flow back to the agent.

    And subscription means that this will not apply to switch/redemption or other non-investment transactions.

    I am not sure if this makes the IFA community happy. Mr. Bhat can opine on that.

    At FundsIndia, we are not planning to charge this amount. Our MF services will continue to be free to investor meaning if he invests Rs. 1000 or Rs. 10000, all the money will get invested in his folio.

    Thanks to Mr. Ramesh Bhat for alerting me with an SMS last evening to the press conf on CNBC 🙂



  2. First time commenting here…

    LOL, look at the hegemony of UK Sinha and his MF peers here… The average SIP per month now is averaging only around 3000 rs. or so and the lumpsum also is well below 10k. SO I DON”T UNDERSTAND their reasoning for levying broker charges to get more ppl in rural markets to invest — who will be putting more than 10k as lumpsum from rural markets when the urbanities themselves are not doing it…

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