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SEBI has reportedly acceded to AMFI’s request in which it has pointed out that genuine cases of switch transactions like money moving from a liquid fund to an equity fund should be kept outside the purview of new TER regulations that says MFDs will get trail commission in line with the previous schemes, said two MF officials familiar with the development.
A senior MF official told Cafemutual that AMFI has written a letter in which it has urged SEBI that MFDs do STPs to do asset allocation of their clients and hence it should be kept outside the purview of new regulations.
Earlier, SEBI said that there will be no incentive on churning. If an MFD moves his client’s asset from scheme A to scheme B, he will either get the same commission structure or such a commission cannot exceed 25% of the committed structure for the first three years.
Mostly, in case of switch transactions, MFDs can get commission structure in line with previous scheme. Basically, there will be no incentive to churn.
However, if SEBI has agreed to AMFI’s request, MFDs trail income will remain intact when they recommend STPs
