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AMFI has extended a special window for ‘opt in’ MFDs to exercise ‘opt-out’ option till November 30, 2022.
This has come after AMFI received several requests from ‘opt-in’ MFDs to increase the timeline to exercise ‘opt-out’ option.
In September, AMFI announced that it will suspend ‘opt in’ distributors who split application to charge transaction fee multiple times for six months from doing fresh business. In fact, AMFI asked RTAs to recover the transaction fees from erring MFDs and credit it to investors awareness fund. In addition, AMCs will have to issue units of MF schemes in lieu of such deduction.
In a communication, AMFI said, “MFDs are allowed to opt-out of transaction charges once in six months between March 01 to March 25 and Sept 01 to Sept 25. In this regard, AMFI had received requests from several mutual fund distributors, who have opted-in for transaction charges to allow additional time to exercise "opt-out" option for transaction charges being charged to investors. Accordingly, it been decided to provide a special window / allow additional time up to 30-Nov-2022 to MFDs who wish to "Opt-out" of transaction charges as a one-time measure.”
AMFI also said that it will soon allow MFDs to submit "opt-out" request online.
About ‘opt-in’ distributors
Distributors have an option to ‘opt in’ or ‘opt out’ of transaction charges (TC). Every year, there are two half-yearly windows available to change status – March 01 to March 25 and September 01 to September 25. If a distributor does not opt for anything, it is considered as ‘opt out’.
Further, ‘opt in’ distributors are required to inform all their clients about transaction charges. This charge is deducted from the investment amount and paid to distributors.
Distributors can levy a transaction charge of Rs 150 for getting a new investor and Rs 100 from existing investors if they mobilize Rs 10,000 or above. In SIPs, transaction charge is deducted in 4 instalments starting from the second month provided the total commitment amount is Rs.10000.
‘Opt in’ norms say that transaction charge is not paid if schemes are sold through the stock exchange route. Also, distributors are not supposed to split investments to earn more transaction charges.
Currently, majority of distributors do not charge transaction fees. Many large distributors like banks usually ‘opt in’ to charge such a fee due to high business volume.
