The woes of the mutual fund industry just don't seem to get over. First came the entry load ban with effect from August 1.
Even before the issue of entry load settles down, market regulator Securities and Exchange Board of India (Sebi) has now clamped down on exit loads, forcing AMFI to issue a circular to fund houses on Thursday.
Well, the cat and mouse game between the mutual funds and Sebi continues.
After a ban on entry loads, mutual funds managed to circumvent it by increasing the exit loads. Sebi then banned differential exit loads for HNIs and retail investors and it has now issued a new diktat.
The regulator’s latest diktat on restricting the maximum period for exit loads has caught MFs off guard once again.
Following a closed door meeting with Sebi on Tuesday, AMFI is issuing a new circular to mutual funds, asking them to charge investors' exit loads only in the first year and not three years.
AP Kurian, chairman of AMFI, said, "It will take a couple of months for the industry to settle down. The impact will be clear by October end or November. Both AMCs and distributors will need to rework the way of doing business."
As the MFs are trying to grapple with the change in norms, sales have already dropped 60-70 per cent so far in August.
Experts believe that a fall in AUM will bring down the profitability of several fund houses as well..
Krishnan Sitaraman, head of fund services at CRISIL, said, "There would be an impact on projected cash flow and income flows, which fund houses have projected. The stronger utilities will survive."
The mutual fund industry complains that the regulator is doing too much too soon, but Sebi seems determined to clear the mess.
So, it will be important for the industry to come together and rework their business model.
Even before the issue of entry load settles down, market regulator Securities and Exchange Board of India (Sebi) has now clamped down on exit loads, forcing AMFI to issue a circular to fund houses on Thursday.
Well, the cat and mouse game between the mutual funds and Sebi continues.
After a ban on entry loads, mutual funds managed to circumvent it by increasing the exit loads. Sebi then banned differential exit loads for HNIs and retail investors and it has now issued a new diktat.
The regulator’s latest diktat on restricting the maximum period for exit loads has caught MFs off guard once again.
Following a closed door meeting with Sebi on Tuesday, AMFI is issuing a new circular to mutual funds, asking them to charge investors' exit loads only in the first year and not three years.
AP Kurian, chairman of AMFI, said, "It will take a couple of months for the industry to settle down. The impact will be clear by October end or November. Both AMCs and distributors will need to rework the way of doing business."
As the MFs are trying to grapple with the change in norms, sales have already dropped 60-70 per cent so far in August.
Experts believe that a fall in AUM will bring down the profitability of several fund houses as well..
Krishnan Sitaraman, head of fund services at CRISIL, said, "There would be an impact on projected cash flow and income flows, which fund houses have projected. The stronger utilities will survive."
The mutual fund industry complains that the regulator is doing too much too soon, but Sebi seems determined to clear the mess.
So, it will be important for the industry to come together and rework their business model.
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