Ban on MF load to take effect on Aug 1

MUMBAI: Despite serious protests from mutual fund distributors, capital markets regulator Sebi has gone ahead and scrapped entry load in equity mutual funds.

From August 1, investors will have the freedom to directly negotiate on the fee that they pay for advisory services rendered by distributors or brokers while purchasing mutual funds.
The upfront distributor commission will be paid by the investor directly (to distributor), based on his assessment of various factors including the service rendered by the distributor, the Sebi order said.

Sebi has allowed mutual funds to set aside a maximum of 1% of redemption proceeds (also known as exit load) in a separate account which can be used by the fund house to pay commissions to distributors and take care of other marketing and selling expenses. Any balance will be credited to the scheme immediately, the Sebi order said.

The regulator has also mandated distributors to disclose all commission, trail or other benefits received by them (from asset management companies) advising a particular scheme to investor.