New Delhi: The Indian mutual fund industry is set to change forever. Tilting towards a more investor-friendly mode with market regulator SEBI set to bring one of the biggest reforms the industry has ever seen - the power to investors to decide the commission they pay and scrapping entry loads.
It's time for reform. For long investors have had to pay commissions every time they bought a mutual fund, without knowing the extent of it. Distributors, on the other hand, have happily pushed funds depending on the commission they earned from a mutual fund. All that is set to change, perhaps, as early as June 18, when the Securities and Exchange Board (SEBI) board meets.
SEBI is planning to scrap entry loads on investors and, more importantly, make it mandatory on distributors to disclose how much of what the investor is paying is going into the distributor's pocket.
In other words, when you buy a mutual fund, you would cut two cheques—one towards investment and the other towards the commission you need to pay.
Needless to say, once charges are out in the open, an investor would have the right to decide and dictate commissions. A transparent regime could also fuel intense competition and bring down commission rates, as was the case in the broking industry.
And even though mutual funds and distributors have been lobbying hard to keep this reform in abeyance, sources tell CNBC-TV18 that SEBI is determined to empower investors with greater transparency.
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