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SEBI against reintroduction of entry load

According to SEBI, investors won’t benefit if entry loads are reintroduced

July 05, 2012 10:26 IST | India Infoline News Service
Market regulator SEBI (Securities and Exchange Board of India) has told the finance ministry that it is against the reintroduction of commissions paid by fund houses to distributors. According to SEBI, investors won’t benefit if entry loads are reintroduced.

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.

The finance ministry had asked SEBI to reintroduce entry loads that would help to bring back the lost glory of the mutual fund industry. But the market regulator has reiterated its opposition to such a move.

On last Wednesday, the finance ministry emphasised the need to revive the mutual fund industry which has seen assets under management (AUM) remaining stagnant for two years. In November 2009, the MF industry had AUM of Rs. 8.21 trillion compared to Rs. 6.92 trillion at the end of June 2012.

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