Sebi's New Regulation on Mutual Fund Distributors

Markets regulator Sebi has immediately abolished the provision that allowed asset management companies (AMCs) to pay transaction charges to mutual fund distributors for investments exceeding a certain threshold. This significant change was reported by PTI and comes after a series of consultations with the public and the industry earlier this year.

Background and Implications

Previously, distributors could earn transaction charges if they secured a minimum subscription of Rs 10,000. However, Sebi has now decided that distributors, acting as agents of AMCs, should be compensated directly through prescribed commission structures, rendering separate transaction charges unnecessary. This decision is expected to streamline distributor remuneration and increase transparency within the mutual fund ecosystem.

Looking Ahead

The regulator's move is part of a broader effort to simplify and clarify the mutual fund distribution process, ensuring that investors and distributors alike benefit from a more straightforward and equitable system.