AMFI has asked fund houses to include SIP and STP along with lump sum contribution to arrive at retail investment for additional TER.
With this, the investment from clients will now be consolidated at fund level or PAN level to see if the investment is retail or non-retail to calculate additional TER for fund houses and incentive for MFDs.
SEBI rules say that retail investors are those who invest up to Rs.2 lakh per transaction. AMCs can charge additional 30 bps applicable on B30 cities only on assets from retail investors.
So far, many fund houses did not consolidate contribution at fund or PAN level to arrive at retail investment. For instance, if an investor has invested Rs.1.50 lakh through lump sum and Rs.1.50 lakh through STP, both the transactions have been treated separately and come under retail account for calculation of additional TER.
In its best practices, AMFI said, “It has been brought to AMFI’s attention that some of the AMCs do not club the switch-in transaction for the purpose of determining threshold limit of Rs.2 lakh for additional TER in respect of mobilization from B30 cites, particularly in respect of switch-in transaction received during NFO. Consequently, such AMCs are charging additional B30 TER and paying additional B30 commission to the distributors.”
Here are key highlights of the best practices circular:
- Clubbing of transactions has to be done at PAN and fund level
- Transaction executed through various distribution channel like MFD, RIA and direct will also be clubbed
- Transaction on behalf of minor or minors will not be clubbed
- Transaction of an individual a proprietorship firm having same PAN will be clubbed
AMFI has asked fund houses to follow these guidelines in letter and spirit.
