If you buy mutual funds (MF) through a distributor, the MF pays her commission, and a common practice is for distributors to pass some of the commission back to investors. This practice is called rebating or passback. But passbacks are banned in the MF industry.
Ban on passbacks
Some distributors agree to pass back certain amount of their commission to attract investors—not just to tempt them to invest, but also to lure them away from others. Institutional investors like some large companies are even known to scout for distributors who give the biggest cuts. In return, distributors get to show higher corpuses under their name.
