Difficult to ascertain whether a person is a first-time
investor or has invested in a mutual fund earlier
Almost a month after the capital market regulator, the
Securities and Exchange Board of India (Sebi), allowed mutual fund (MF)
distributors to charge a transaction fee from investors, the Indian MF industry
faces a dilemma: How to ascertain whether a person is a first-time investor or
has been with some MF scheme in the past.
As per a circular issued by Sebi on 22 August, MF
distributors will now be able to charge Rs. 100 from existing investors (those
that have already invested in some MF scheme earlier) and Rs. 150 from
first-time MF investors. Both the charges kick in if the investment is Rs.
10,000 or above per subscription.
Joining the dots
In a meeting between all the registrar and transfer agents
(RTAs) held over the phone early Thursday morning, they contemplated on three
key issues.
According to data provided by Value
Research , an MF tracking firm, there are eight RTAs apart from three fund
houses that manage their RTA activities in-house through their sister
companies.
Primarily, to make the distributor charge a reality, RTAs
will need to share their data among one another. Industry sources indicate that
they will mostly engage an outside firm with whom the RTAs would share their
data. This firm will then run a check against all the RTAs to ascertain whether
the investor has bought an MF scheme before or not. “The firm needs to run a
check through the investor’s permanent account number (PAN) across data
available with all RTAs,” said an MF’s chief executive officer, who refused to
comment saying the issue is still being debated.
However, the confusion arises over investments made before
July 2007 when PAN wasn’t compulsory for all. PAN was made compulsory for all
MF investments of Rs. 50,000 and above, effective December 2004, and
subsequently for all investments, effective July 2007. “So we still have a few
investors who had invested in MFs prior to 2007 without submitting their PAN
details,” adds a senior official of one of the leading RTAs, on condition of
anonymity. He cannot be quoted as he is not the official spokesperson of the
firm.
During the Thursday meeting among RTAs, they tentatively
decided to refer to other investor details such as email addresses, postal
addresses and bank mandates with those provided by investors who would invest
henceforth to determine whether the said investor is already present in the
database.
“This could also be tricky as bank mandates were also not
compulsory once upon a time. Further, the investor would have changed his or
her address, so there the problem arises as to how to map the details provided
afresh vis-a-vis what’s already there in the system,” said the RTA official we
spoke to.
Already the quantum of the distributor charge is a matter of
heartburn among many distributors, who claim that the charge is too low. In a
recent survey conducted across 755 distributors by Cafe Mutual, a Mumbai-based
independent website that disseminate news and information on the Indian MF
industry, 73.68% of distributors felt that these transaction charges will not
impact the independent financial advisors’ decision to push MFs more
aggressively than before.
What the MF industry appears to have decided is to maintain
the no-transaction charge as status quo. Distributors will be allowed to “opt
out” of accepting transaction charge, an option given by Sebi. Those
distributors who wish to subscribe to the transaction charge will need to write
to the Association of Mutual Funds in India (Amfi), the MF industry body,
separately and Amfi will then pass on this list to all fund houses.
A uniform charge
Coming back to the quandary, another alternative that some
fund houses are contemplating is to do away with the Rs. 150 charge for fresh
investors and charge just Rs. 100 across investors. “This will eliminate the
confusion of having to find out whether the investor has invested for the first
time or has invested before,” says another chief executive of a
government-owned fund house we spoke to. He too did not want to be quoted as he
claims the matter is controversial.
However, not many feel this is a viable option. Says V.
Ramesh, deputy chief executive officer, Amfi: “I don’t think eliminating the Rs.
150 charge is an option. If Sebi has come up with Rs. 100 and Rs. 150 charge
structure, it will need to be followed.”
The RTA official also said that since Sebi has made this
mandatory, the onus is on the RTAs and the industry to find out a solution.
Source: http://www.livemint.com/2011/09/22222024/Fund-houses-in-a-tizzy-over-tr.html?h=B
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