MF News SEBI to revisit trail commission structure

SEBI to revisit trail commission structure

The market regulator has found that a few AMCs have been offering higher trail commission in the first year.

Sridhar Kumar Sahu Feb 18, 2020

SEBI will soon come up with regulation to level trail commission structure across the investment tenure. The regulator said this at its board meeting held today in Mumbai.

Madhabi Puri Buch, Whole Time Member, SEBI said, “Recently, it has come to our notice that some mutual fund schemes offer higher trail commission in the first year (and it reduces in the subsequent years). So, we do propose to restructure it.”

A public disclosure on schedule of commission available on a private bank’s website shows that the difference between first-year trail commission and second-year trail commission is as high as 1%.

For instance, a few fund houses offer 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%.

Experts feel that such a discrepancy in trail commission across fund houses encourages churning of portfolio.

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27 Comments

suresh kumar ranka · 4 years ago `

sebi is controlling to mutual fund why it is not controlling to insurance companies
as amfi is only NAME where as IRDA is not doing as SEBI
WHY sebi is controlling to mutual fund only it should bound on insurance also

Dheeraj Kapur · 4 years ago

The full form of SEBI is systematic elimination of Brokers and IFA

Arun · 4 years ago

Dear Sure... It is surprising that you are talking about insurance commission... MF agents have been miss selling and always targeted Insurance... They irresponsibly advise to surrender Insurance ( life Security Instruments) and take risk with MF... It is wrong... ours is unique contry where Investment comes before Saving and Insurance... unlike developed societies world over considered insurance first for risk transfer.. saving next for old age and investment for luxury goals...
So friend Insurance and pension saving agent deseve that commission...

Yosh · 2 years ago

Suresh, SEBI does not control insurance sector because insurance schemes are not a security, and it has nothing to do with the exchange.

Dheeraj, SEBI full form is Securities and Exchange Board of India.

NKJ · 4 years ago `

In most parts of the world Distribution is never done without proper advice and never directly by Insurance or Fund Managers. Sure there is strict licensing policy but then the Commission structure is also appropriate. It's a win win situation for all the stake holders.

Laxman kumar · 4 years ago `

Already the trail commission offered to Distributors is pittance, as per report , no new entrants ready to enter this field, Babus in SEBI virtually making this business unviable for new distributors, I am in this business for over 20years , these days I am selling more NCD and fixed income products it's bye bye Mutual fund

swanand · 4 years ago `

i think sebi wants to close distributors like PPF/NSC s any one wants to do PPF there ware many of Agents of small saving /post office ,PPF , now days very difficult to find one .

Raghavendra Purohit · 4 years ago `

It is the distributor who bear the brunt of customer's anger when the fund's NAV is down but the same distributor doesn't get the proper income. Let SEBI come up with only Direct mutual funds, at least distributor will move to different profession or business. Distributors are not rich enough to work for charity.

Ravikumat · 4 years ago `

Sebi should first have a white paper on churning of portfolios by individual distributor , ND / Groups of individuals : once the ratios are determined the structure should
Be marked accordingly. In your job appraisals are given to best performing staff and is not the same across the office .

KHATAU · 4 years ago

Trail commision shud be in ascending order of ageing of AUM. Longer the investment higher the AUM. This is a win win for all stake holders and will avoid churning. But if this is not the real intention of regulators then frequent changes will be made to the commission structure at the cost of the distributors commission JUST on the pretex of INTEREST OF INVESTOR INTEREST.

Tulsi Ram Thakur · 4 years ago `

SEBI is instructing to reduce trail commission how a new distributor will survive. Only people will enter the mutual distribution business who wants to do charity. Otherwise by less pay-out how some one stay in this business.

Rishabh · 4 years ago `

All measures taken by sebi are definitely not in the interest of advisors for sure , if there is so much issue with commission being passed only keep direct , let amc do business on their own

Sudhir Kumar Mishra · 4 years ago `

SEBI should look into the issue where the distributors are getting trail less than the difference between expense ratio of regular and direct plans. There should be uniformity of trails. You can't penalize a customer due small amu of the concerned distributor.

jitendra · 4 years ago `

Better to take penalties from fund houses for that much aggression than distributors

ASHOK KR SAHEWAL · 4 years ago `

Why these regulators want to spoil the best investment avenue like mutual fund. I can't understand..It is not in interest of investors and as well as a nation. Today market is in range bound as bcoz a lot of money is coming in share market thru mf.

Sushil Gundecha · 4 years ago `

Not at all Acceptable. one side sebi. wants to promote MF and other side we advisor who gives businesse gets cut in Commision
let SEBI stops full incentive at 0% and see how growth in MF comes.
we are not here to give free service .

Minesh · 4 years ago `

SEBI is in a di or die strategy. They have kept TER in their control now within TER let AMC do the best possible payouts as it's a marketing strategy.
SEBI is not bother about the difference of TER between direct & regular option even though it's not matching with the difference of brokerage.
Anyhow they are behind the distributor community and it looks like SEBI wants them to see as unemployment.

Hrushikesh Tarte · 4 years ago `

Every day some or the other changes from SEBI for mf industry indicate it's agenda to destroy mutual fund industry and it

praful patil · 4 years ago `

Look @ NPS classical example of a good idea getting waste because of no proper channel of distribution as only INR 100/- get paid as commision for one account . SEBI and AMFI if they wish to increase penetration will only have to build volumes on distribution side as banks nowadays have stopped selling MF due to low commissions.

SANDEEP · 4 years ago `

SEBI Must stop Allowing Distribution to Sell MF,AMC & Large Distributor are enough capable to sell their Product.
SEBI is want to create a World Record in applying more Regulation on MF only.

Ajay sinha · 4 years ago `

In my context 1st yr trail shud be zero. Already mf aum incremental add is 5lac Cr let level playing field exist. 2nd yr onward mf Distributer gets 10paise 3rd yr 20p and so on best model.

ANAND JHUNJHUNWALA · 4 years ago

Better to charge the distributor for getting investments. That will be the best model. No?

Punit · 4 years ago `

Sebi never disscuss on amc expenses which are more high always eye distributor commission

Anonymous · 4 years ago `

The very idea of selling its products through distribution channel implies that company wants to reduce its production /servicing cost irrespective of the product / industry. For mutual fund companies, they have hardly 1 or 2 emp in a city on the payrolls, offices r small & rented. The get their transactions processed through CAMS /KARVY again outsourced. Its always good to put the customers first as that is the first lesson of any MBA school, in my opinion SEBI should abolish all third party agencies used by an AMC like R&T Agents, Selling Agents & direct these companies to hire people on regular pay rolls & keep only DIRECT option. I am sure all existing investors would be benefited & AMCs would be forced to hire thousands of employees across the country to sell & serve the existing investors & ctap new also. I think all these AMCs were having the same option also available when they started their respective companies. These AMCs only decided to sell their products through freelancers in the market by paying them variable payments instead of hiring employees on fixed pay & give them annual increments, just like the banks do

AMIT THAKKER · 4 years ago `

ON ONE HAND SEBI WANT TO GROWTH BUSINESS OF MF ON OTNHER HAND THEY CUT THE COMMSION AGENT OR DISTUBT HAS EXPENESS LIKE TRAVEL AND POSTANGE TO GET TRANSCTION PROCESS HE HAS TO GO TO CILENT 2 - 3 TIMES AND ALSO AMC I DID NMOT UNDERSTAND HOW THEY CAN DO BUSINESS I REQUEST SEBI PL GIVE REPLY

Ajay sinha · 4 years ago `

We will do micro detailing analysis of trail model so Ifa not do miselling at least For first 3yrs. We will soon launch zero trail plans across amc to this effect. Happy selling Ajay Sinha

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