Disclosing commissions to investors is an operational nightmare for distributors catering to retail investors
Mumbai: The practice of disclosing commissions to investors is practically impossible; according to distributors. Market watchdog SEBI through a circular issued on June 30, 2009 had asked distributors to disclose commissions received from AMCs to investors. According to SEBI, this was done to increase transparency between distributors and clients. However, this rule has found few takers among the distribution community. The diktat is largely said to have not been followed by IFAs.
The self declaration format circulated by AMFI ARN committee applicable for corporate and IFAs contains the following disclosure: “In compliance with SEBI Circular no. SEBI/ IMD/CIR/No.4/168230/09 dated June 30, 2009, I/ we have disclosed to investors all the commissions (in the form of trail commission or any other mode) payable to me /us for the different competing schemes of various mutual funds from amongst which the scheme was recommended to our investors.”
Distributors are required to send this certification to RTAs or AMCs every year.
H N Sinor, CEO, AMFI in an earlier interview with Cafemutual had shared the possibility of displaying commissions on AMC or AMFI websites. But this move is unlikely to have any major impact, according to a few distributors Cafemutual spoke to.
“Even if you put it on AMFI or AMC websites, it is not going to work. People are not net savvy even today. How will investors from smaller towns know about AMFI or AMC web sites? Secondly, how can you discuss commissions without even knowing whether the person is going to invest through you or not? In a distribution house, you have different levels of marketing teams all of whom are not privy to such information,” said a top distributor from Mumbai who caters to corporates and HNIs.
“It is displayed in some bank branches. In most cases, only a wide range is given. When a customer goes online to invest, there is a link which shows the pricing the distributors get. It is debatable whether investors actually visit the link to see the commission,” said a sales head of a leading fund house. “It can’t be implemented overnight. The industry has to figure out a way.”
Adds a top official of a national distribution network, “It’s not at all practical. Each category of scheme has different commission structure. It is very difficult to implement. We are disclosing it on our website when a investor logs in.”
