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SEBI makes two changes in final commission disclosure circular

Date : 21-09-2016
Name: Vijay Venkatram ARN NO :87541
Firm Name : Wealth Forum City : Mumbai

Hi,

A quick update: 


The much awaited final circular from SEBI on MF commission disclosures is now available: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1474371881657.pdf

There are two changes that SEBI seems to have made:

(1) The channel bias reflected in the original version has now been scrapped. Earlier, SEBI wanted a disclosure of direct plan NAVs of schemes even where investors had invested in the regular plan versions only. This was aimed at facilitating an easy comparison between the options, thus potentially influencing investors to opt for the "cheaper" version. This has now been scrapped. In the final CAS statement, only the NAV of the schemes/plans that the investor has invested in, will be shown.

(2) While absolute amount of commission will be disclosed (much to the disappointment of distributors who were hoping for only percentage level disclosure), there is a foot note that will be added in the CAS statement that the commission disclosed is gross commission and that service tax and distributor's operating expenses are not reflected in this. This foot note, it is hoped, will aid client conversations which many distributors now fear may revolve around commissions and pass backs rather than investments and goals.

Check out the disclosure format mandated in SEBI's circular. With this, a heightened level of commission disclosures is now a reality. Channel bias has mercifully taken a back seat.

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"We trust that you will avoid using harsh language and will refrain from making unsubstantiated allegations against individuals and firms. Your constructive feedback and opinions are very valuable to all of us in the industry. "

Comments Posted
YOGESH SHAH ARN NO :36492 MUMBAI, 13 Oct 2016

ALL JOKERS ARE MAKING A ABSURD/RUBBISH LOW. THEY HAVE NO SENSE. ALREADY IN 2009 THEY ABOLISH ENTRY LOAD; & DISTRIBUTORS COMMISSION SHRINK TO TENTH PART. WHY SHOULD DISTRIBUTOR SELL MUTUAL FUND???? THEY CAN KEEP MAXIMUM PERCENTAGE CEILING FOR PAYING COMMISSION TO DISTRIBUTOR BY AMCS. BUT HOW CAN THEY SHOW COMMISSION AMOUNT AT FOOTNOTE? NORMALLY AMC PAYING COMMISSION TO DISTRIBUTOR ON VARIOUS SLABS. NOT ONE SLAB FIT TO ALL. WHOEVER PROCURE MORE BUSINESS IN SPECIFIC AMC; AMC WILL PAY MORE COMMISSION TO THAT DISTRIBUTOR COMPARE TO WHO PROCURE LESS BUSINESS. HOW AMC WILL SHOW COMMISSION AMOUNT ON ABOVE SCENARIO?????????????//// ITS TIME TO IFA SHOULD BE UNITED.

SANTOSH ROY ARN NO :16655 MUMBAI, 13 Oct 2016

Absolute Commission Disclosure is ABSOLUTELY RIDICULOUS. In real sense it is NOT IN INTEREST OF INVESTOR. THEY (SEBI) ARE NOT IN THEIR SENSES.

RAMA SHANKAR ARN NO :ARN-109341 AMBEDKAR NAGAR, 13 Oct 2016

Disclosure of Commission has totally Negative impact on MF Industry and IFA This time is awareness in Rural Investor towards investment in Mutual Fund Disclosure of Commission affect to IFA as well as Indian Economy too So I request to SEBI you can show commission under Total Expense of the Mutual Fund Scheme

Bhubaneswari mishra ARN NO :98409 Bhubaneswar, 30 Sep 2016

Respected all...I think sebi should be understand the effect in mind of investors after disclosure. .they never focus their return. .but watch the distributor payment. In India nobody happy to see the growth of other. .hw it is fair to disclose the payment of anybody. .if sebi want to discipline the distributor. ..he has many options. .its not a solution to disclose the payments to client.its so sorry. .sebi should rethink about it.

SATYA ARN NO :SRI KRISHNA CAPITAL CHENNAI, 30 Sep 2016

TRANSPERANCY AND DISCLOSURE IS KEY TO SUCCESS. HISTORICALLY INVESTOR LOST MONEY IN SHARE TRADING. RIA IS REQUIRED FOR EQUITY SHARE SELLING. HOW MANY INVESTOR LOST MONEY IN MUTUAL FUND VS SHARES. ANY INVESTOR COMMITTED SUICIDE BY INVESTING IN MF? SEBI KNOWS VERY WELL, BUT ALWAYS TARGETED MF INDUSTOR. LET SEBI DO WHAT IS GOOD FOR INVESTOR AND INDUSTRY. IF IFAS ARE PAID THE BEST, WHY IFA NUMBERS ARE NOT INCREASED COMPARED TO EQUITY DEALERS. MR CHAIRMAN OF SEBI, PLEASE DO NEEDFUL FOR INVESTORS. SAVE INVESTOR AND ALSO RETAIL MF INVESTOR

EPURU RAMACHANDRAM ARN NO :45122 HYDERABAD, 26 Sep 2016

I HOPE SOMEWHAT IMPACT WILL BE THERE BUT NOT DOES MAKES BIG DIFFERENCE.

Amit Kumpawat ARN NO :ARN-51203 DHUBRI, 24 Sep 2016

Why on earth do they need to disclose distributors earnings, next disclose evry govt officials salary perks on every document , ask all businessmen to declare their purchases, costs etc.. this is purely ridiculous

Sunil Kumar Yadav ARN NO :85149 Meerut, 24 Sep 2016

Md.Tuglaq is still alive in the form of SEBIs official.

Sumit ARN NO :98249 Chandigarh, 23 Sep 2016

Clearly sebi is discouraging mutual fund business, but why only mutual fund , what about life insurance in which maximum misselling involved .

T Dharmaraj ARN NO :66139 Trivandrum, 22 Sep 2016

The disclosure of commission gives an opportunity to the client to demand a part of the commission. Sharing of commission is against the code of ethics. Why should the m f distributors are forced to go that way; which is not seen any other business/profession. Will the authorities do the needful to rectify such unethical directions?

Pradeep Ranjan Tripathi ARN NO :0737 Kanpur, 22 Sep 2016

In the name of transparency you cannot make a person naked.

Pradeep Ranjan Tripathi ARN NO :0737 Kanpur, 22 Sep 2016

1.Why always there is a bias against the distributors? 2..How many complains are against distributors? If someone is adopting wrong practices then SEBI/AMFI has a right to suspend/terminate the code. 3.Is AMC dirtributing the commission above the prescribed limit of expenses. 4.If a distributor is earning handsome. It means he is working very hard, paying service tax, income tax, employing number of person as staff, maintaining good office with modern facilities to provide prompt and efficient services. All the money is not going to his pocket.

Sudhir Chandra Tripathy ARN NO :ARN-62863 Cuttack, 21 Sep 2016

Despite a lot of hue and cry, SEBI is determined to implement an ultimate nuisance of disclosing commission, gifts, tours & travels or any other incentives paid only to the IFAs. A disclosure of this nature will surely lead to pass-backs or a clear feeling that a part of their Fund growth is being taken away by the IFAs leading to a bitter relationship between the two. IRDA has not imposed any such regulation as it does not want to protect the Policyholders interest. If SEBI is keen to do it why they dont mention about the heavy Service Tax and IT liabilty of IFAs. Ultimately, this is sure to have negative impact on investment figures in coming months and such regulations may be withdrawn. But by then, the irreparable damage to the industry and its real Ambassadors(IFAs) is already done. It is clearly a vindictive act and will never do good to anyone. Lets pray that the industry mitigates this blow too as it had done in the past and sail smooth by coming out of the turbulence.

usha sharma ARN NO :79286 Raipur, 21 Sep 2016

If SEBI really wants benefit of customers than they should try to set limit of brokerage, but the motto of SEBI and present govt isto kill the advisors they are never in favour of investor,

ranjan kumar sehgal ARN NO :1321 jalandhar, 21 Sep 2016

It is very sad that the sebi has ignored totally concerned of the distributors which are pillars of this industry. Insurance specially life is totally based on mis-selling and most of the mis-selling is done by the banks.When will irda/sebi/govt look at this. secondly the sebi has mandated to charge expenses on the basis of percentage of aum buy why the sebi is insisting on gross commission made by the distributors instead of percentage ?. we all fail to understand.

VISHAL RASTOGI ARN NO :51920 PATNA, 21 Sep 2016

It should be much better if there would be a statutory warning also publish along with this that " Any investment decision made without Advisor help could bet disaster to you financial health ". ...... then it would have equate the balance.

AJAY BIRENDRA SINGH ARN NO :60982 NAGPUR, 21 Sep 2016

In my opinion SEBI thinks that commission disclosure of advisors is beneficial for investors. But if SEBI discloses his name of employees and their salaries, that will be more beneficial for not only investors but the societies also. Can he do this?

Bipin S. Shah ARN NO :38233 Thane, 21 Sep 2016

CAS or Mutual Fund SOAs do not mention the absolute or CAGR percentage returns earned by Investors. I believe that the participation in MFs would explode if investors had a clear idea of the returns actually earned by them through their SOAs and were able to make a clear comparison with other financial and other assets. It is indeed ironic that it was considered more important to disclose the amount of commissions received by Distributors than to compulsorily include such basic information in the SOA / CAS. Investors would be in a better position to compare and judge performance of the Advisor / Distributor and asset class vis-a-vis the costs involved had both aspects been given side by side in the CAS / SOA. Now, most distributors will be left apologetically explaining the Commission figure than the actual Fund performance and its impact on the investors goals.

sunil bhagat ARN NO :ARN 9646 pondicherry, 21 Sep 2016

It is better that the stt comes with the foot note of the exclusion of service tax , distributor operating exps., and that the direct plan is not mentioned at all. However the fact that we were not able to implement the same in % age terms is really a loss. I agree with MR. Amit Kumar Das of Chandernagore to some extent that some investors may go direct but when the mkt tanks a lot of the investors will abandon the Mutual fund investments itself as they are not mature enough to hang in extreme volatility or sustained downward. That is the time when the handholding of the IFAs is strongly required.

Pankaj Gupta ARN NO :SKLB Fiscal Services Noida, 21 Sep 2016

This Move will only prompt for the passback commission and nothing else, also decision authorities even know this but they have no answers to this question.

Amit Kumar Das ARN NO :35318 Chandernagore, 21 Sep 2016

When investors will see that the agent got some money, he will be displeased. Exactly that is SEBIs wish. Gradually most will abandon agents. A few of them will go direct but most will ABANDON mutual funds altogether.

SEEMA SAMIR DESAI ARN NO :ARN-81127 DAHOD, 21 Sep 2016

I have no issue, if this type of transparency will start in all business. e.g. if we buy medicine then actual production cost will also print on it. if we buy grossary it is there. Then why only for IFAs. since last 7-8 years I saw that when industry is going to stable and then authority will put some issue to stop its growth. In this coming scenario IFAs will step by step going out of industries as when after ban of entry load and drop down brokerage amount. I hope all IFAs will give there view on this forum. I know it is to late but, this is the best way to convey your message.

Jayant ARN NO :20116 Dehradun, 21 Sep 2016

I wish SEBI would also make it mandatory for AMCs to disclose the absolute and CAGR returns of the investment which is really what the investor should be worried about.

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