AMFI
is said to have put a proposal before fund houses to cap upfront commission
paid to distributors at 1% with effect from April 1, 2015. Also, the industry body has recommended that 'upfronting' of commissions should be done away with. In
MF parlance, ‘upfronting’ means that the entire trail commission is paid at the
beginning.
"AMFI has proposed that the trail commission should also be same for all years. The rule may apply to all types of schemes, including SIPs," said a CEO of a private sector fund house.
This has come in the wake of a sudden spurt in the upfront commission paid to distributors to promote close end funds. Currently, there is no limit on upfront commission payouts. As a result, a few AMCs have reportedly paid as much as 7% upfront commission to distributors to promote their close end funds.
A senior official from a small fund house said that the final decision on upfront commission will be taken next week among AMFI members.
In an earlier interview with Cafemutual, HN Sinor, CEO, AMFI, when asked about banning upfront commission, has said, “No, they won’t be banned. We were looking at whether we can adopt an all trail model. However, it would have disrupted the industry. An all trail model can be implemented in a calibrated manner over a period of time. As a first step, SEBI might cap upfront commissions.”
However, a few fund officials said that AMFI cannot enforce this rule on AMCs.
