Market regulator SEBI on Friday proposed making the disclosure of entry load mandatory by mutual fund distributors to usher transparecy in the system.
Entry load is an amount deducted by MFs from investor’s subscription for making payment to distributors.
SEBI has suggested making a separate section in the application form for entry load. Besides, a separate cheque has also been proposed to be issued by investors for the purpose.
The regulator has asked the stakeholders to reply to these proposals by March 6.
Pointing out that there are different commissions and charges for different schemes, SEBI said, “ the question arises as to whether the advice rendered is in the interest of investor or whether it is influenced by the quantum of commissions.”
Mutual funds are sold to investors through distributors and agents who act as agents of the Asset Managament Company and help investors to choose the scheme, SEBI said.
However, SEBI had earlier mandated a zero entry load for investors who apply directly for the mutual fund scheme but other investors applying through brokers or agents were still not able to have control on the commission paid to them.