No More Entry Load for Mutual Fund Investments - SEBI
June 18, 2009
In a press release following its board meeting today, the Securities and Exchange Board of India (SEBI) announced its decision to abolish entry loads for all mutual fund schemes, new and existing.
Author : Deepali Lalwani
Titled “Transparency in payment of commission to Mutual Fund distributors”, SEBI has decided that, “There shall be no entry load for the schemes, existing or new, of a Mutual Fund. The upfront commission to distributors shall be paid by the investor to the distributor directly. The distributors shall disclose the commission, trail or otherwise, received by them for different schemes/ mutual funds which they are distributing or advising the investors.”
As we have already mentioned in our previous article on this issue, the basic premise behind this regulation is that retail investors have no control today over the charges they pay to the fund houses (and through them to the distributors). There are also practices like churning of client portfolios to earn entry load, and rebating that SEBI wants to reduce, making the relationship between investors and advisers more transparent and service-oriented.
In previous move in this direction, in January 2008, SEBI stated that investors investing directly with fund houses should be charged zero entry load.
Deepali Lalwani is part of iFAST Financial India Pvt Ltd
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