SEBI Ends Mutual Fund Transaction Charges for Distributors
The Securities and Exchange Board of India (SEBI) has eliminated the provision that allowed asset management companies (AMCs) to pay transaction charges to mutual fund distributors. This change is effective immediately, simplifying the fee structure and increasing transparency for investors.
Previous Rule: The prior framework permitted distributors to receive transaction charges from AMCs for new investors (₹150) and existing investors (₹100) on subscription amounts of ₹10,000 or more. These charges were deducted directly from the investor's investment.
Reasoning for the Change: Following public and industry consultations, SEBI determined that these separate charges were redundant, as distributors are already compensated by AMCs through commissions.
Objective: The new rule's primary goal is to streamline the compensation process for distributors and enhance transparency within the mutual fund industry, ultimately serving to better protect investors' interests.
Implementation: The sections of the SEBI Master Circular for Mutual Funds that previously governed these charges have been deleted, officially codifying the new policy.
This policy shift ensures that distributor compensation is managed solely through a commission-based system, eliminating additional charges on an investor's initial investment and creating a clearer, more straightforward fee structure.
I'm Aisha shehu
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