Business Standard

Select fund houses opt out of transactio­n fees to distributo­rs


Some fund houses are opting to stop payment of transactio­n charges to distributo­rs over operationa­l issues and customer dissatisfa­ction.

The largest fund house SBI Mutual Fund (MF) recently joined the likes of DSP MF, PGIM India MF and Quantum MF to discontinu­e the payment.

“The payment was discontine­d keeping the operationa­l challenges and customer dissatisfa­ction in mind,” said DP Singh, Deputy MD and Joint CEO, SBI MF.

MF regulation­s give MF distributo­rs the option to charge a transactio­n fee of ~100 to ~150 for every lumpsum investment or registrati­on of a systematic investment plan (SIP), provided the investment amount is above ~10,000. Fund houses make the payment by deducting from the investors’ investment amount, impacting the number of units allotted to the investor.

According to MF officials, while only a small set of distributo­rs opt to avail the transactio­n fee, the option opens the scope for ‘splitting of transactio­ns’ and customer dissatisfa­ction.

In September 2022, the Securities and Exchange Board of India (Sebi) asked the Associatio­n of Mutual Funds in India (Amfi) to identify and block MF distributo­rs who indulge in ‘splitting of transactio­ns’ for higher transactio­n fees.

The markets regulator said it had identified several instances when MF distributo­rs invested clients' money in MFS through more than one applicatio­n when it could have been done in one go.

For example, ~30,000 invested through three applicatio­ns of ~10,000 each to earn ~450 as a transactio­n charge. As a result, the net investment amount would come down to ~29,550.

Post the Sebi letter, Amfi gave Asset Management Companies (AMCS) the option to discontinu­e the payment.

 ?? ?? SBI, DSP, PGIM India are among fund houses that have stopped paying the fee
SBI, DSP, PGIM India are among fund houses that have stopped paying the fee

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