MFs seek clarity on new Sebi norms

Association may take up the issue in today’s meeting.

The Indian mutual fund industry is as much confused as relieved, following the new guidelines from capital market regulator Securities and Exchange Board of India (Sebi) on transaction charges.

Sources said Industry body, the Association of Mutual Funds in India (Amfi), has scheduled a meeting tomorrow to bring clarity on the issues.

“In order to help mutual funds penetrate into retail segment in smaller towns, the 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 investors,” Sebi had said in a note on Friday.

But there was confusion among investors when Sebi chairman U K Sinha added: “A transaction charge of Rs 100 will be allowed to be charged. However, if there is a new customer who does not have an existing folio, the charge can be Rs 150.”

Fund players said there was confusion about the transaction charge of up to Rs 150 on the operational front, which needs to be cleared on a priority. They said the confusion was primarily over defining a “new” and “existing” investor. Further, fund managers have sought clarity on whether the transaction charge was only on equity funds or would include debt funds as well.

The chief marketing officer of a large-size fund house, requesting anonymity, said: “There is confusion over the issue of whom should we treat as a new investor and an existing one.” For instance, he said: “If an investor is already invested in ‘A’ fund house and s/he does not have a folio with ‘B’ fund house, if the investor starts investment with ‘B’, should ‘B’ consider it as a new folio or an existing folio?”

“Since, ‘B’ fund house does not have the investor’s folio, it will be a new folio for it. But that investor is not new to the fund industry,” he noted.

Agrees the chief executive officer of another fund house. “The issue is, should we consider a new investor as a new folio from the industry’s perspective or from the fund house’s perspective? In that case, when should Rs 100 be charged as transaction fees and when should Rs 150 be charged?”

The confusion gains importance as out of the close to 40 million retail folio base of the mutual fund industry, it is not necessary that there be 40 million investors. Fund managers say, the actual number of retail investors may not be more than 25 million, as there are several cases where an investor owns more than one folio in one or more fund houses.