AMCs can charge additional 30bps applicable on B30 cities only on individual assets i.e. retail and HNI assets.
In a letter sent to AMFI, SEBI has clarified that AMCs can include assets from individual investors – retail and HNIs to arrive at additional TER charged to compensate distributors in B30 cities till the time market regulator defines retail investors.
In fact, the market regulator has given a new formula to the additional TER:
So far, AMCs had to consider new inflows from B30 cities. There was no need to segregate assets based on investor category i.e. individual or institutional.
Further, SEBI said that AMCs will have to follow the list issued by AMFI to look at T30 and B30 cities.
On October 22 2018, SEBI has directed fund houses to charge the additional 30 bps applicable on B30 cities only on retail AUM. However, in absence of a definition on retail investors, AMFI sought a clarification on how AMCs can calculate additional TER on B30 assets to compensation distributors with trail commission
In 2012, SEBI introduced the B15 cities regulation (modified to B30 cities in April 2018) to incentivise AMCs to increase mutual fund penetration beyond the top metros. The idea was to compensate mutual funds on the additional cost required to capture and service clients from smaller towns. Generally, these costs tend to much higher in case of individual clients compared to institutions.
