Mutual Funds – Variable Entry Load – Opportunity for Investors 4

SEBI has issued a Proposal on 13th Feb’09 for Variable Entry Load for investments in Mutual Funds made through Distributors.
This is good step forward for investors who use Distributor’s service to the minimal. They can henceforth pay less by bargaining on the Entry Load.
This will be good for both investors and Distributors. For Investors – it will reduce their cost of investing by reduced Entry Loads. For Distributors – they can pull in more investors by offering attractive discounts on Entry Load, which were earlier offered illegally by cash payout will now be paid out officially.

The concept paper considers two ways of paying the commission to the distributor:
a) Separate section in the application form: Within the application form itself, there could be a section where the investor could indicate the commission payable to the distributor which would be signed off jointly by the investor and the distributor. The AMC would then deduct the amount payable and pay the distributor.
b) Separate cheque issued by the investor towards commission: In this mode the investor issues two cheques – one for his investment in the name of the scheme and the second one in the favour of distributor towards the commission agreed to be paid.

The Concept Paper has been put up for Public Comments. Comments are welcome till 6th Mar’09.
Send your comments to mfcomments AT sebi.gov.in or by post.

Click Here to view the Concept Paper

4 thoughts on “Mutual Funds – Variable Entry Load – Opportunity for Investors

  1. Aaron Wakling Feb 24,2009 17:45

    I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.

  2. goyalbb Feb 25,2009 20:22

    what about entry load in insurance sector?

  3. Kowcigan Feb 25,2009 22:34

    goyalbb,
    As such we do not have an entry load in Insurance Policies. But in ULIP, the insurance companies have something called as Management Charges – This they charge irrespective of how they received the application – through broker or directly from the policy holder.
    Probably, what needs to change in Life Insurance is Brokerage paid out must not be directly related to Premium Paid but the Sum Assured. This way even for high premium ULIP products, brokers will get lower commission as the Sum Assured is normally low. This in turn will ensure they do not mis-sell high brokerage policies

  4. Pingback: My Thoughts» Blog Archive » My Feedback on Variable Load in MF

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