The Securities and Exchange Board of India (Sebi) is trying to ensure that mutual fund (MF) investors get the best deal from distributors. The regulator, in a circular on Wednesday amending the code of conduct for MF intermediaries, directed distributors to disclose to clients all information, involving commissions received for competing schemes of various MFs, of which the scheme was recommended.
The move is an extension of the recent changes by Sebi in the fee structure of distributors. As per the changes, investors need to pay directly for the quality of services by the distributor, unlike previously, when MFs compensated the distributors. In June, Sebi had asked fund houses not to deduct marketing and distribution expenses from investments made by investors.
Intermediaries will not rebate commissions back to investors and avoid attracting clients through temptation of rebate/gifts. A focus on financial planning and advisory services ensures correct selling and also reduces the trend towards investors asking for passback of commission, the regulator said.
Besides, distributors of MF products have been restrained from indicating or assuring returns in any type of scheme, unless the scheme information document is explicit in this regard. Sebi has also asked registrars to maintain necessary infrastructure to support the asset management companies in maintaining high service standards to investors.
...ensure that critical operations such as forwarding forms and cheques to AMCs/registrars and despatch of statement of account and redemption cheques to investors are done within the time frame prescribed in the SID/SAI and Sebi mutual fund regulations, the Sebi circular said.
The chief marketing officer with a large domestic fund house said, These changes in disclosure fee will result in distributors concentrating on selling just 4-5 mutual funds rather than schemes from 25-30 fund houses.