Mumbai: The markets regulator Sebi on Monday said that mutual fund could charge upfront trail commission for SIPs of only up to Rs 3,000 per month for a scheme from an investor.
The commission will be paid from the books of the asset management company (AMC) and only the first SIP purchased by the new investor will be eligible for upfronting, the Sebi circular said.
The regulator had in October 2018 asked the AMCs to adopt full a trail model of commission in all schemes while allowing upfronting of trail commission only in case of inflows through systematic investment plans (SIPs).
The Sebi amended the conditions required for upfronting of trail commission based on SIP inflows at the mutual fund level. “The upfronting of trail commission may be for SIP of up to Rs 3,000 per month, per scheme, for an investor who is investing for the first time in mutual fund schemes,” Sebi said in a circular.
It further said in case multiple SIP(s) are purchased on different dates, the SIP(s) for which the installment starts on the earliest date will be considered for upfronting.
The commission will account for computing the TER (total expense ratio) differential between regular and direct plans in each scheme, the Sebi said.
TER is a percentage of a scheme's corpus that a mutual fund house charges towards expenses, including administrative and management.
For the purpose of charging additional TER on inflows from retail investors, from beyond top 30 cities (B-30 cities), Sebi said that inflows of up to Rs 2 lakh per transaction by individual investors will be considered as inflows from the retail investor.
AMCs are required to disclose the TER of all mutual fund schemes except infrastructure debt fund schemes on their website on a daily basis.
Also, issuance of prior notice to the investors will not be required in case of any increase or decrease in TER due to change in asset under management (AUM) or other regulatory requirements.
Further, Sebi while making other modifications in disclosure norms, said that schemes in the category of overnight fund, liquid fund, ultra short duration fund, low duration fund and money market fund will be exempted from making performance disclosure provided that the schemes are in existence for less than one year.
