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SEBI MF Panel Proposes a Rs. 100 Transaction Charge

According to ET, the SEBI Mutual Fund Panel has suggested a transaction charge of Rs. 100 per transaction instead of an entry load:

The committee headed by Prashant Saran , member of the board at the markets regulator, last week nearly concluded that a Rs 100 transaction fee could be imposed on investors for every new investment that will help distributors cover costs

But quite interestingly:

"The committee turned down industry body Association of Mutual Funds in India’s suggestion to reintroduce entry loads on specific funds," said a person privy to the discussions. "Entry load was no longer an option."

While I’m happy to pay Rs. 100 per transaction, I will mostly likely go direct anyhow and avoid the fee altogether (and why should I pay? I’m a registered AMFI advisor myself!)

Distributors have costs per transaction – the petrol to the nearest CAMS office, dropping of cheques and what not. That might be covered. But for everything else, the current system affords them decent loads already; most equity products pay upto 1.5% upfront and then 0.5% trail every year.

  • Rakesh says:

    You mentioned you are ready to pay Rs. 100 per transaction.
    What if you had weekly/monthly SIP’s of Rs. 500, would you still pay Rs. 100 per transaction? That would be 20% charges

    • Well, it doesn’t cost any lesser to go to the CAMS office and fill out forms whether it’s a 500 rupee transaction or a 50,000 rupee transaction no? So why have different charges?
      If the 500 rupee weekly SIPper wants he can ditch the distributor, go DIRECT and not pay any such charge. That option hasn’t been taken away.

  • ramesh says:

    there must be some mistake here .. either the information is incomplete or Shri Prashant Saran spends his waking hours imbibing magic mushrooms and acid .. i mean 100 rupees blanket sum?? what about chaps investing small amounts from Rs 1000 onwards, what about debt funds??
    you know deepak i have never understood this .. if the fund companies find incentivising distributors difficult post the load abolition scenario why can’t they just increase their fund management fees .. is there a limit there?? .. one would think that the new funds would be more aggressive there bringing in more folios to ’em (i.e they would offer more to their distributors and take a cut in their commissions) and gradually the industry would reach some suitable equilibrium …

    • Ramesh: Such investors should go DIRECT. They can even do the payment online. There is no need to go with a distributor. I support the proposal because it pays distributors for their time in filling forms. As for advice, they need to charge investors otherwise.
      Yes, there’s a total fee limit – of 2.5% (and within that the actual management fee comes down after 100 cr. AUM, 500 cr. AUM etc.) The industry is already getting aggro and cutting their own fees (certain ELSS funds offer 4% upfront fees (but no trails)!)

  • Jagadees says:

    None of these incentives will bring back MF distributors unless there is fat-commission of 2007 given to them. This predator behavior of distributor is clearly evident in recent fall in sales of ULIPs. once IRDA extended lock-in period and spread the commission for 5 years, most of the distributors abandon ULIPs and went back to traditional plans. All they want is upfront fat pay-check….hence instead of wooing the distributors back, AMC and SEBI should invest heavily on investors awareness and built healthy investor base….yeah all this will take long time with considerable focus and investment but the sad thing is everyone looking for shortcut to greatness 🙁

  • Rajeev says:

    Deepak, which AMCs are paying 1.5% upfront (non ELSS) ? Reliance, HDFC, ICICI etc are paying 0.5% upfront and 0.75% trail. I am not talking about the smaller AMCs who can do anything ?

  • Madhu says:

    Agree… Distrubutiors need to spend money to service Investors… Why not go Online as in Share’s. Paperless applications. I remember AMFI was planning to launch a combined online Platform but that was stopped after NSE launched its own MF platform. AMC’s should start pushing for Online transcations it will be cost effective and I am sure the current commsion will cover for Broadband and rentals.

  • shikhar says:

    Rs. 100 transaction fee per transaction is there but for SIP,one whole SIP would be considered a single transaction

  • PersonalFN says:

    Investors enrolling for a Systematic Investment Plan (SIP) would face the brunt of a 100 transaction fee. This is because say for example an investor starts a 1,000 SIP in a mutual fund scheme, he would be charged 100 which accounts to 10% of the initial investment; which is much more than what was charged when the entry loads were in force. This thus reveals that retail investors contributing a lower amount for a SIP would feel the pinch the most.