Sebi scraps transaction charges for MF distributors, effective immediately

Markets regulator Sebi has abolished transaction charges paid to mutual fund distributors, bringing an immediate end to the provision that allowed asset management companies (AMCs) to pay such charges for investments above a certain threshold. 

The regulator said the decision came after a public consultation was carried out in May 2023 and an industry consultation in June this year. 

Under the earlier framework, Sebi said distributors were eligible for such charges if they brought in a minimum subscription amount of Rs 10,000. 

"...Sebi Master Circular for Mutual Funds dated June 27, 2024, allows AMCs to pay to the distributor transaction charges, subject to a minimum subscription amount of Rs 10,000 brought in by such distributors," the regulator said in a circular on Friday.

 

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Based on the feedback, Sebi observed that distributors, as agents of AMCs, are entitled to be remunerated by the AMCs, the "charges or commission, as prescribed under rules, shall be done away with".

 

Accordingly, the master circular -- which governed these charges -- have been deleted. This will come into force with immediate effect, the regulator said.

 

This change is expected to simplify the distributor compensation process while maintaining transparency in the mutual fund ecosystem.