The Securities and Exchange Board of India (Sebi) plans to cap the commission for mutual fund (MF) units sold on e-commerce platforms at 50 basis points (bps). Currently, commissions of up to 150 bps are paid for this. Those investing directly with a fund house don’t have to pay a commission but other charges like fund management fees.
A different cost structure could lead to a third set of net asset value (NAV) for MF units sold on e-commerce platforms. Currently, fund houses provide two sets of NAV, one for products sold through distributors and another for those sold directly. Typically, the difference between the expenses is 75-100 bps. Initial discussion is around allowing different commission structures for different platforms. The move could mean a single scheme could have different NAVs for different online sellers, depending on cost structure.
“Having so many NAVs does not seem a fairly conducive proposal and could lead to confusing of retail investors. These are initial phases of discussion and the sector would need to fine-tune the differential costing model before it is implemented,” said Manoj Nagpal, chief executive, Outlook Asia Capital.
Earlier this month, Sebi had meetings with the country’s leading e-commerce entities to discuss the proposal to sell MFs using their platform. People in the know said the latter were concerned about their responsibilities and liabilities in selling or distributing these financial instruments. Flipkart and Snapdeal are said to be working on a limited liability model, where any regulatory onus will fall on the seller empanelled with them.
These e-commerce players entities might, however, need to get a registration number from the Association of Mutual Funds in India. Sebi is said to be keen on removing the hurdles for selling MFs through e-commerce platforms by January.
Meanwhile, Sebi is keen on removing impediments such as the in-person verification required for completing the Know Your Customer process. It is said to have informed its MF Advisory Committee (MFAC) to suggest a way around the requirement. It is learnt the MFAC discussed this on Thursday, along with various suggestions of the Sumit Bose committee on removal of upfront commission and product improvement. Sebi is likely to discuss some of these with its board of directors, scheduled to meet end-November.
Sebi proposes differential NAV for schemes sold on e-commerce platforms
The cap on expenses by e-commerce players would be 50 bps
For the same scheme, different e-commerce firms can have different NAVs
- Sebi plans to finalise e- KYC and differential costing by January