There have been many changes made by the mutual fund regulator (SEBI). Many of them have hurt the industry – and hit badly.
However the biggest change which has hurt – has hurt the distributor, not the fund houses. That is the crux of the change. Did the AMFI protest ? The answer is NO. Why?
Simply because it was hurting only the distributor, not the manufacturer. So the association of manufacturers did not bother!
Now let us take a case of a mutual fund buying shares worth Rs. 100, and let us say they pay 1% as BROKERAGE (they actually pay 0.1% or less) – what do you think happens to the brokerage?
It gets treated as expense…correct? Hell, no. It gets added to the cost of the asset – so the NAV will go up by Re 1. So the nav in this case will go up by Rs. 101. This actually means the MUTUAL FUND could not care about how much brokerage that they pay….sad, but the accountants will tell you that it is the way it is!
Now if suppose SEBI says that brokerage paid should be treated as an expense (and within the cap of 1.5%!)….
the industry will SCREAM…and the manufacturer’s association will also scream….and all hell will break loose…ha ha what fun!!
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