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SEBI has recently instructed AMFI to direct AMCs that they can no longer charge exit loads on switching of transactions from regular plans to direct plans.
So far, fund houses were allowed to charge exit loads on switch transactions from regular plans to direct plans. Since regular plans used to pay upfront commission, AMCs were allowed to charge exit loads on such switches.
However, since there is no commission involved in direct plans, AMCs were not allowed to charge exit loads on switching of direct plans to regular plans.
While the industry discontinued paying upfront commission in 2018, many AMCs were still charging exit loads on switching transactions from regular plans to direct plans, observed SEBI.
Through the best practices circular, AMFI told fund houses not to charge exit loads on switch transactions from regular plans to direct plans also.
SEBI advised AMCs who are still following the practice of charging exit loads on switch from regular to direct plans should issue an addendum and align with SEBI’s advice, said AMFI.
With this development, there will be no exit load on switching of transaction from regular to direct plans and direct to regular plans.
