Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: VAT RATES :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: due date for vat payment :: list of goods taxed at 4% :: cpt
« General »
 India’s GST among most complex in world, and it is 0% tax rate that is hurting the idea
 Can’t overrule courts with retrospective amendments, says Supreme Court
 Why tax planning should be an all-year round activity
 8 financial tasks you should do in the next 30 days
 Income Tax department may defend CPC in returns fraud case
  Income tax department sends notices to investors over tax treaty gains
 Seven months after GST rollout: Time for handholding over, Centre to intensify efforts to curb tax evasion
 Individual angels may get tax relief too
 The differences between tax and cess
 Startups that raised funds from angel investors face tax scrutiny
 Tax collection assumptions in India's budget ambitious

SEBI move to aid small players
August, 10th 2009

The latest SEBI move towards a uniform exit load for fund houses will stop the practice of small investors subsidising the bigger ones in the same scheme. This could also help, to some extent, deter those fund houses which practiced the money for AUM concept, wherein they used money power to increase their assets under management (AUM), although a major chunk of this AUM came from corporates and was mostly aimed at short-term gains, industry players said.

The practice of differential exit load worked this way: Fund houses are allowed to charge some money from innvestors when they exit a scheme. Under SEBI rules this charge, called exit load, could be up to 7% of the value of the investment, but most fund houses limit it to 2.5%. The catch, however, is elsewhere. Several fund houses have graded exit loads in most of their schemes where higher the total investment by an investor or a corporate, lower the load.

For example, someone with Rs 1 lakh in an MF scheme will be charged 2% exit load, that is Rs 2,000, if he wants to redeem his investments . But a corporate house that has Rs 5 crore in the same scheme will not be charged anything if it decides to redeem. In both cases the fund house will incur some costs, in the form of fund management, administrative and others expenses, and is also allowed to charge up to 1% exit load as marketing expenses for the scheme. In the above example, while the small investor pays Rs 2,000 to exit the scheme, the corporate walks away for free.

Now if 100 small investors, each with Rs 1 lakh invested in the scheme, prefer to exit in the short run, along with one large investor, the fund house will collect an aggregate of Rs 2 lakh, but this only from small investors and nothing from the large one. In effect the smaller players subsidise the big investors.

On Friday, SEBI said that henceforth fund houses will not be allowed to differentiate among different types of investors and all should be charged exit loads uniformly . The discrimination has ended, said Vijay T Gokhale, an investor activist who claimed to have petitioned SEBI to do away with differential load structure.

It was a complete anti-thesis of the very concept of mutual funds, which should be more tuned towards small investors , said the head of a domestic fund house. Big investors can always pay a little more money and have private managers for their funds.

The concept of differential exit loads had made a large part of the Indian MFs more like a corporate treasury that was being subsidised by small investors. Often some fund houses went after big corporates , induced them to put surplus cash into their schemes with no loads for large sums while loads existed for small investors. The differential exit loads were not applicable for long term investments.

If one combined this decision with SEBIs recent decision of no entry load to customers , the message from the regulator is clear: It is the job of intermediaries (MF distributors and financial advisors ) to bring in funds, while fund houses should concentrate on managing money without discriminating between investors, an industry veteran said.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions