{"id":48,"date":"2011-07-29T03:55:00","date_gmt":"2011-07-28T22:25:00","guid":{"rendered":"https:\/\/blog.fundsindia.com.cp-29.webhostbox.net\/?p=48"},"modified":"2013-04-09T13:29:04","modified_gmt":"2013-04-09T07:59:04","slug":"is-the-entry-load-back","status":"publish","type":"post","link":"https:\/\/fundsindia.com\/blog\/uncategorized\/is-the-entry-load-back\/48","title":{"rendered":"Is the entry load back?"},"content":{"rendered":"

(Back to blogging after a while)<\/p>\n

SEBI held its board meeting yesterday and made some pretty significant decisions. Although the decisions pertaining to the takeover code is garnering all the headlines, what matters most to us here at FundsIndia are the decisions relating to mutual funds.<\/p>\n

There were quite a few of them actually. Deepak Shenoy of CapitalMind has a great (as usual) summary of the decisions here:<\/p>\n

http:\/\/capitalmind.in\/2011\/07\/sebi-mf-commissions-back-takeover-norms-changed…<\/a><\/p>\n

Please read the article to get a good birds eye view.<\/p>\n

In this space, I will comment specifically on a couple of the decisions:<\/p>\n

Rs. 100 or Rs. 150 transaction fee on MF transactions:<\/strong><\/p>\n

SEBI has decided that they will allow distributors to charge upto Rs. 100 as a transaction fee. Per my understanding, it means:<\/p>\n

1. This charge is optional – that is a distributor might choose to charge it or not<\/p>\n

2. It will come out of the investment money (no second cheque) of the investor<\/p>\n

3. It will apply only to investment transactions and only when the amount is higher than Rs. 10,000<\/p>\n

4. For SIPs, it will collected in installments over the first few payments.<\/p>\n

5. It cannot be charged for direct to MF transactions.<\/p>\n

This is being viewed in different quarters as a re-introduction of entry load or MF commissions.<\/p>\n

I don’t agree for the following reasons:<\/p>\n

1. Previously, ALL distributor transactions were subject to a load (declared at scheme level) regardless of what the distributor wanted. Now, it is optional. A distributor could choose to charge it, while another does not. It really lets the investor choose the channel\/distributor to go with should they make this a criterion for decision.<\/p>\n

2. The amount is variable upto a max ceiling as opposed to previously when the load was uniform across the board.<\/p>\n

3. It is in terms of rupees and not basis points which again is a significant departure from the previous model.<\/p>\n

At the end of the day, this should be seen as a pretty investor friendly move by SEBI in the sense that it affects the investor very little:<\/p>\n

1. They will always have options to go to where they don’t need to pay this charge<\/p>\n

2. Even if they go with an agent who charges, at the end of the day, it will likely work out to a pretty small percentage of their investment (unless they fall prey to an agent who insists on investing in different peoples names and\/or multiple tranches of Rs. 10,000 to maximize revenues).<\/p>\n

For FundsIndia customers, no such worries need apply. We will not be charging this fee. Period.<\/strong><\/span><\/p>\n

Distributor regulation<\/strong><\/p>\n

SEBI has also said that large, national distributors will be subject to stricter oversight and regulation. We wholeheartedly welcome this move. At FundsIndia, we have been doing business in the most diligent, ethical manner from a centralized office with strict conformance to regulations. Any move to regulate this space of the market\/industry will work out in our favor. Large national financial institutions with hundreds of points of presences and free-for-all sales techniques are the ones to be afraid of this decision.<\/p>\n

Apart from these two, the other things that caught our eye were the promise of KYC regulation (making it uniform and less cumbersome) and about the infrastructure debt funds. In both cases, we need more details to get more excited about, although the words in press release sound promising.<\/p>\n

Happy investing!<\/p>\n","protected":false},"excerpt":{"rendered":"

(Back to blogging after a while) SEBI held its board meeting yesterday and made some pretty significant decisions. Although the decisions pertaining to the takeover code is garnering all the headlines, what matters most to us here at FundsIndia are the decisions relating to mutual funds. There were quite a few of them actually. Deepak […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"yoast_head":"\nIs the entry load back?<\/title>\n<meta name=\"description\" content=\"SEBI held its board meeting yesterday and made some pretty significant decisions. So, is the entry load back? 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