Sebi rules: Mutual Fund investors to pay Rs 100-150 fee to invest

First timemutual fund investors will now have to pay an additional 150 as transaction charges according to new rules approved by securities market regulatorSebi which are aimed at widening the reach of mutual funds.

Existing investors inmutual funds will have to pay an additional 100 as transaction charge. According to a member of an advisory committee of Sebi on mutual funds, the extra 50, which will be charged for new investors, will help meet Know Your Customer, or KYC, and other incidental expenses.

"The whole idea of this step is to make good the transportation and incidental expenses incurred by the distributor while collecting the application forms from the investor," the person said.

Sebi chairman UK Sinha said that distributors will be allowed to charge 100 as transaction charges for each subscriber to help mutual funds penetrate into the retail segment in smaller towns.

The regulator has made it clear that these charges will only be applicable on fund investments exceeding 10,000. No charges will be levied on transactions other than new fund purchases. Sebi has exempted direct fund transactions from this levy. Transaction charges - of 150 for new investors and 100 for existing investors - will be charged to the fund in three to four instalments. Transaction charges are in addition to the existing eligible commissions permissible to the distributors, Sinha said.

"It'll definitely help distributors servicing retail investors. Transaction charges will cover running costs of smaller distributors," said Rajiv Bajaj, managing director, Bajaj Capital, a national distributor, adding, "it would be nice if the regulator also built-in distributor commission to the application."

Senior Sebi officials said the decision to introduce transaction charges has been taken against the backdrop of a shrinking mutual fund investor base. As a first step towards regulating distribution services, AMCs have been told to conduct due diligence while availing the services of large-sized distributors.

Fund houses will also have to disclose the aggregate amount of commissions paid to distributors besides greater disclosures in terms of performance benchmarks and break-up of assets -- equity and debt-- to provide a more realistic picture.

Source: http://economictimes.indiatimes.com/markets/regulation/sebi-rules-mf-investors-to-pay-rs-100-150-fee-to-invest/articleshow/9403175.cms