After scrapping the entry load on mutual funds, the Securities and Exchange Board of India (SEBI) has said a maximum of one per cent of the redemption proceeds, or exit load, should be maintained in a separate account which can be used by the asset management companies (AMCs) to pay commissions to the distributor and take care of other marketing and selling expenses.
“Any balance should be credited to the scheme immediately,” said a Sebi circular. Sebi had abolished initial issue expenses and mutual fund schemes were allowed to recover expenses connected with sales and distribution through entry load only. Further, investors making direct applications to the mutual funds were exempted from the entry load.
In terms of existing arrangement, though the investor pays for the services rendered by the mutual fund distributors, distributors are remunerated by AMCs from loads deducted from the invested amounts or the redemption proceeds. SEBI (Mutual Funds) Regulations, 1996 also permit AMCs to charge the scheme (under the annual recurring expense) for marketing and selling expenses including distributor’s commission.
“Any balance should be credited to the scheme immediately,” said a Sebi circular. Sebi had abolished initial issue expenses and mutual fund schemes were allowed to recover expenses connected with sales and distribution through entry load only. Further, investors making direct applications to the mutual funds were exempted from the entry load.
In terms of existing arrangement, though the investor pays for the services rendered by the mutual fund distributors, distributors are remunerated by AMCs from loads deducted from the invested amounts or the redemption proceeds. SEBI (Mutual Funds) Regulations, 1996 also permit AMCs to charge the scheme (under the annual recurring expense) for marketing and selling expenses including distributor’s commission.
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