The SEBI (Securities and Exchange Board of India), at its board meeting on August 16, will consider the reintroduction of a 2% entry load for mutual funds which are sold in more than top 15 cities. The regulator will also consider giving asset management companies (AMCs) greater flexibility in managing their total expense ratio. SEBI may also discuss with the government options like tax breaks to investors, according to media reports.
The SEBI board is likely to request the Mutual Fund Advisory Committee (MFAC) to develop a policy paper on mutual funds after consulting all stakeholders, the reports added.
Fund houses launch mutual fund schemes which are sold by intermediaries like independent financial advisors, financial planners and banks. Commissions to distributors and marketing expenses were met by the fund house by charging an entry load of 2.25% from investors. In 2009, SEBI banned the entry load which dried up inflows into mutual funds. As a result, in the past two-three years commercial interest of distributors has come down, and they are not motivated to sell mutual funds.
Currently, only the expense ratio is charged by a fund house as a fee to manage and operate the fund, and is recovered over a period of time.
The MFAC, in its report submitted early this month, has suggested a separate tax benefit of Rs 50,000 a year for equity and debt schemes with a one-year lock-in.
SEBI to make expense ratio flexible for AMCs