In a bid to increase transparency in mutual funds, SEBI has asked fund houses to disclose investment and advisory fees and other expenses along with the gross commission of distributors with immediate effect.
Simply put, the half yearly consolidated account statement (CAS) will now have two more columns for the disclosure of management fees and other expenses along with the gross commission paid to distributors. However, the market regulator has not clarified if such disclosures will be in percentage terms or absolute terms.
Anuj Kumar, CEO, CAMS believes that fund houses will have to disclose such disclosures in percentage terms. “Since there is no mention on this it is better to disclose such expenses in percentage terms.”
However, a few experts have a different view. “Since fund houses have been disclosing gross commission of distributors in absolute terms, they will have to disclose management fees and other expenses in absolute terms to maintain uniformity.”
In a press release SEBI said, “The scheme’s average total expense ratio (in percentage terms) along with the break up between investment and advisory fees, commission paid to the distributor and other expenses for the period for each scheme’s applicable plan (regular or direct or both) where the concerned investor has actually invested in.”
This commission figure includes all direct monetary payments and other payments made in the form of gifts/rewards, trips, event sponsorships etc. by AMCs to distributors. Also, this disclosure come with a footnote that reads, “The commission in Col 9 above indicates gross commission received by the distributor against the respective investment and does not exclude costs incurred by distributors such as service tax (wherever applicable, as per existing rates), operating costs, etc.”
