SEBI announces a series of changes for MFs

Here is a summary of the key SEBI announcements regarding mutual funds

Transaction charges

Mumbai: A distributor would be allowed to charge Rs. 100 as transaction charge per subscription. No charge can be made for investments below Rs. 10,000. An additional amount of Rs. 50 can be charged to first time mutual fund investor.

However, there would be no transaction charge on

1. Transactions other than purchases/ subscriptions relating to new  inflows.
2. Direct transactions with the mutual fund.

For SIPs, the transaction charges can be recovered in 3 or 4 installments. The transaction charges are in addition to the existing eligible commissions permissible to the distributors.

Regulation of distributors of mutual fund products by AMCs

Selected distributors will be regulated by AMCs by putting in place a diligence process. The process will be initially applicable for those distributors satisfying one or more of the following criteria:

1. Multiple point presence in more than 20 locations.
   
   
2. AUM raised over Rs.100 crore across industry in the non institutional  category but including HNIs.
   
   
3. Commission received of over Rs. 1 crore p.a. across industry.
   
   
4. Commission received of over Rs. 50 lakh from a single mutual fund. It is estimated that this measure will cover distributors handling about half of the total AUM in the industry.

Currently, Know Your Client (KYC) is done by each SEBI regulated intermediary viz. broker, depository participant (DP), mutual fund, portfolio manager etc. A common KYC will be enough now. Also, the Unique Identification Document or Aadhaar number will be included in the eligible documents as part of the KYC process.

Common Account Statement

One common account statement will be dispatched every month via emails for investors who have transacted in any of his folios across the mutual funds and for investors whose emails are not registered with the AMC, a hardcopy would be sent. The statement shall also contain the disclosure related to the transaction charge paid to the distributor. One common account statement will be dispatched to the investor every half year for all non-transacted folios.

Permissible activities that can be carried out by AMCs

AMCs to manage and advise pooled assets such as offshore funds and pension funds etc. that are broad based, provided there is no conflict of interest due to differential fee structure.

Transparency of information

Guidelines for advertisements will be modified to include

• point to point return on a standard investment of Rs. 10,000 and other performance related disclosures.
  
  
• more granular disclosure of AUM figures giving break up of debt/equity/balanced and also geography wise disclosures.
  
  
• performance of fund manager across all schemes managed by the same fund manager will have to be disclosed.
  
  
• Besides, the scheme performance will have to be disclosed against Sensex or Nifty or Government of India debt paper in addition to scheme benchmark.

However, it is not known when these changes will be implemented.