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03 May 2012 03:46 PM
IFAs request SEBI to bring in variable load  
Ravi Samalad and Pallabika Ganguly
 

IFA associations IFA Galaxy and FIFA met SEBI today to submit their suggestions for increasing MF penetration in the hinterland.

Market regulator SEBI met major distributor associations today to seek suggestions to overcome the constraints relating to distribution and reach of mutual funds. The meeting was chaired by Prashant Saran, Whole-time Member, SEBI. The distributors were represented by four members from IFA Galaxy and two from FIFA.

SEBI has asked mutual fund distributors to increase volumes and expand the reach of mutual funds in Tier-II and Tier-III towns. The two IFA associations present in the meet have submitted a detailed recommendation plan to SEBI today.

Sources in the know confirm that the following issues were discussed in the meet:

  1. Need for uniform transaction and application form.
  2. Standardization of the minimum investment amount in all funds. Currently different funds have various minimum investment amounts.
  3. Inclusion of the fund category in fund name, so that it is easy for the IFA as well as the investor to understand the category in which he is putting his money. This will be beneficial for attracting investments from tier II cities.
  4. AMCs should officially declare some indicative yield for FMPs.
  5. SEBI should try to relax norms for in-person verification for NRIs.
  6. Charge variable load (investor can mention the percentage they want to pay to the distributors) or re-introduce entry load.

In the current scenario, advisors are facing many hurdles which prevent them from substantially increasing their reach. “Farmers in small towns don’t have a cheque book so we take demand drafts from them. This becomes a third-party cheque which is not allowed by SEBI. We have to get a certification from a bank which requires investors to shell out Rs 100. Who will bear this cost? Investors are not willing to pay. The incentive has to be embedded in the form of variable load so that investors get to choose how much they want to pay,” says Ramesh Bhat, President of IFA Galaxy, who was present at the meeting. 

Mutual Fund CEOs are also scheduled to meet SEBI today to discuss the challenges faced by them. 

 
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