If Securities and Exchange Board of India (Sebi) has its way, you may be able to buy mutual funds (MFs) from stock exchanges, eliminating the need for an agent. Taking cue from the regulator, the MF industry will meet executives of National Stock Exchange (NSE) and Bombay Stock Exchange shortly.
In a consultative meeting between the Sebi chairman CB Bhave and heads of MFs on Tuesday, the capital markets regulator discussed ways and means by which the industry can get going in the post no-load rule introduced from August 1.
While an industry in panic has worked out a distribution payoff model (to pay upfront commission from its future profits), it has imposed an exit load of 1 per cent for any mutual fund withdrawal before three years for all new subscriptions.“The regulator has asked the industry to reconsider the exit load move and see if it can bring it down to withdrawals within one year,” a source present at the meeting told Hindustan Times.
However, industry players justified their actions by saying that they want investments to be long term and also if the investors withdrew after one year without paying the exit load then they would not be able to recover the upfront commission cost.
While the regulator and the industry feel that the industry can only move up, the regulator raised the issue of non-uniformity in commission structure within the industry.
“The regulator pointed out that some fund houses fix high commissions for their distributors and is not the right thing to do as it would hurt others,” the source said.
Both the industry and the regulator felt that no entry load is a mere speed breaker, not the end of mutual funds.