SEBI auditors have reportedly asked a few fund houses about the methodology they follow to give preferential treatment to select distributors. Simply put, SEBI wants to know various AUM slabs that fund houses follow to arrive at trail commission offered to distributors.
Currently, most fund houses follow AUM slabs to arrive at trail commission. The more business you give to a fund house, the better would be your commission structure. As a result, fund houses give attractive commission rates to their large distributors such as banks, NDs and large IFAs.
A senior official of a fund house who has received this query told Cafemutual that the market regulator is checking whether fund houses are paying commission more than the TER of a scheme. “This exercise is to ensure that fund houses are not paying distributors additional commission from their books. Basically, SEBI wants to see if fund houses pay commission within the TER limits.”
Another query to a few fund houses is relating to IAP corpus to educate investors.
Please note that these queries have surfaced from SEBI’s ongoing audit. Cafemutual has checked the credibility of this story with seven AMCs of which four fund houses have said that they have received such queries.
