SEBI is said to have nudged fund houses to disclose the commission structure of distributors in account statement, said two senior officials familiar with the development.
“According to a 2009 SEBI circular on improving transparency in payment of commission, SEBI had mandated fund houses and distributors to disclose commission structure to investors. But there was no mention on how it should be disclosed. Many fund houses take a signed acknowledgement from distributors that they have disclosed commissions to their clients. However, nothing much has happened in practice which is why SEBI is now nudging us to put such disclosures in the account statement itself,” said a senior official on the condition of anonymity.
In a 2009 circular on empowering investors through transparency in payment of commission and load structure, SEBI had said, “Distributors should disclose all the commissions (in the form of trail commission or any other mode) payable to them for the different competing schemes of various mutual funds from amongst which the scheme is being recommended to the investor.”
Another senior official told Cafemutual that the proposal of disclosing commissions of distributors in account statement is likely to be implemented. “Considering SEBI’s push, this is bound to happen. However, a possible solution to this matter is to disclose commission payouts of distributors in percentage terms instead of the amount received.”
Last week, AMFI, in its board meeting, decided to approach SEBI on the issue of disclosing distributor commissions in account statement as most fund officials are against this proposal. “We feel that this is a controversial issue which needs to be discussed in detail. We have to discuss the implications of this move on the industry. Hence, the board has decided to take up this issue with SEBI,” said a fund official who attended this meeting.
Many distributors have vehemently opposed this proposal as they believe that such a disclosure will be regressive and induce pass back practice by investors.
