SEBI is likely to ask fund houses to pay uniform trail commission across the investment tenure, said two MF officials familiar with the development.
A CEO of the large fund house told Cafemutual that the market regulator is said to have found that a few fund houses have been paying higher trail commission in the first year and lower in subsequent years. SEBI feels that it will go against the spirit of circular to ban upfront commission, he said.
Another MF official requesting anonymity feels that such a discrepancy in trail commission across fund houses would encourage churning of portfolio.
A public disclosure on schedule of commission available on Citibank India website shows that a few fund houses have been offering 1.65% as the first year trail commission and 0.65% in the second year. However, the aggregate three-year trail commission of most fund houses is close to 3%. You can look at the commission structure by clicking here.
A senior official offering such a structure said, “We have been paying trail commission within the ambit of regulation. Offering commission structure is a business decision.”
