SEBI has allowed upfronting of trail commission even on SIPs of up to Rs.5000 per month per investors across all schemes activated before October 22, 2018, i.e. before date of implementation of the SEBI circular on distributor commission.
This means, you will get 1% commission on SIPs of up to Rs.5000 for three years in advance that was activated before October 22, 2018. However, this will be applicable on SIP contribution from first time investors based on PAN. For instance, if a first time investor starts SIP of Rs.5000 for three years, distributors will get close to Rs.1800 as upfronting of trail commission.
In a letter sent to AMFI, SEBI said, “Regarding considering of SIPs registered prior to SEBI Circular dated October 22, 2018 for the purpose of determining the total SIP inflows across all schemes of a mutual fund up to Rs.5000, it is clarified that upfronting of trail commission for total SIP inflows of upto Rs.5000 per month, per investor, across all schemes of a mutual fund, includes SIPs registered prior to the date of the circular i.e. October 22, 2018.”
Earlier, AMFI had asked SEBI whether upfronting of SIPs of up to Rs.5000 was applicable on SIPs started before the circular on distributor commission was issued.
Fund houses can claw back such a commission on a pro-rata basis from distributors if investors discontinue SIP for which the commission is paid.
Also, SEBI will take appropriate action if it finds irregularity in this practice.
