The NSDL (National Securities Depository Ltd) case will be on top of Sebi's agenda when it meets on Monday, but another issue that may come up at the board meet is the proposed introduction of variable load structures on mutual funds.
Market regulator Securities and Exchange Board of India (Sebi) is keen to introduce a variable load structure for mutual funds that will allow investors to negotiate the commission they pay to distributors.
But, given the resistance from distributors and fears that distributors may end up pushing insurance products that offer higher commissions, the industry is urging the regulator to try a different approach.
"Every business for a distributor should be profitable, so today he is finding challenges in one product. We as AMCs should ensure our profitability to them," said Nimesh Shah, MD & CEO of ICICI Prudential Mutual Fund.
Industry body AMFI (Association of Mutual Funds of India) suggests giving investors two options.
Under plan A, a variable load could be charged depending upon the service or advice rendered by the distributor while under Plan B no upfront load is charged to investors but the distributor would be compensated by the fund house in the form of higher trial fee, which in turn will charge the customer an expense fee.
" Within the load there should be some variability, so the investor and distributor together decide what should be the load depending on the quality and extent of service and advice rendered. The second option is when there is no upfront load at all but to compensate the distributor must be given a trail commission," said AP Kurien, chairman, AMFI.
A trailing commission is not only likely to confuse investors, but they may also be made to fork out a bigger expense fee, which doesn’t serve Sebi’s objectives of cost control and transparency.
Meanwhile, according to our sources in Sebi, the probability of plan B getting cleared is remote.
Market regulator Securities and Exchange Board of India (Sebi) is keen to introduce a variable load structure for mutual funds that will allow investors to negotiate the commission they pay to distributors.
But, given the resistance from distributors and fears that distributors may end up pushing insurance products that offer higher commissions, the industry is urging the regulator to try a different approach.
"Every business for a distributor should be profitable, so today he is finding challenges in one product. We as AMCs should ensure our profitability to them," said Nimesh Shah, MD & CEO of ICICI Prudential Mutual Fund.
Industry body AMFI (Association of Mutual Funds of India) suggests giving investors two options.
Under plan A, a variable load could be charged depending upon the service or advice rendered by the distributor while under Plan B no upfront load is charged to investors but the distributor would be compensated by the fund house in the form of higher trial fee, which in turn will charge the customer an expense fee.
" Within the load there should be some variability, so the investor and distributor together decide what should be the load depending on the quality and extent of service and advice rendered. The second option is when there is no upfront load at all but to compensate the distributor must be given a trail commission," said AP Kurien, chairman, AMFI.
A trailing commission is not only likely to confuse investors, but they may also be made to fork out a bigger expense fee, which doesn’t serve Sebi’s objectives of cost control and transparency.
Meanwhile, according to our sources in Sebi, the probability of plan B getting cleared is remote.
