Commissions, norms for MFs modified

Markets regulator Sebi reviewed and modified the commission as well as disclosure norms for the mutual fund industry.

The move comes after the regulator in October 2018 asked the asset management companies (AMC) to adopt full trail model of commission in all schemes while allowing upfronting of trail commission only in case of inflows through systematic investment plans (SIPs).

The Sebi amended the conditions required for upfronting of trail commission based on SIP inflows at the mutual fund level. "The upfronting of trail commission may be for SIP of up to Rs 3,000 per month, per scheme, for an investor who is investing for the first time in mutual fund schemes," Sebi said in a circular.

The commission will be paid from AMC's books and only the first SIP(s) purchased by the new investor will be eligible for upfronting.

In case multiple SIP(s) are purchased on different dates, the SIP(s) for which the installment starts on the earliest date will be considered for upfronting.

The commission will account for computing the TER differential between regular and direct plans in each scheme, the Sebi said.

TER (total expense Ratio) is a percentage of a scheme's corpus that a mutual fund house charges towards expenses, including administrative and management.