SEBI, vide its circular no. CIR/IMD/DF/13/2011 dated August 22, 2011 has introduced regulations regarding Mutual Funds. One of the regulations was relating to transaction charges in respect of Investments sourced by Distributors. SEBI vide its circular no CIR/IMD/DF/21/2012 Dated 13-Sep-2012 has, in partial modification to SEBI circular no. CIR/IMD/DF/13/2011 dated August 22, 2011, advised that distributors shall have also the option to either opt in or opt out of levying transaction charge based on type of the product.
Transaction Charges (TC) in respect of investments sourced by Distributors :
Asset Management Companies (AMCs) will deduct the TC from the subscription amount and pay to the concerned ARN holder, subject to deduction of service tax, if any. This could be in addition to existing upfront / trailer fees paid by the AMCs, if any.
Categorization of Distributors as "Opt In" and "Opt Out"
SEBI has also introduced a concept of a distributor "Opting In" or "Opting Out" for the purpose of transaction charges.
|Sr. No.||Category of product|
|1||Liquid/ Money Market Schemes|
|4||Infrastructure Debt Fund Schemes|
|5||Equity Linked Saving Schemes (ELSS)|
|6||Other Equity Schemes|
|8||Gold Exchange Traded Funds|
|9||Other Exchange Traded Funds|
|10||Fund of Funds investing Overseas|
|11||Fund of Funds - Domestic|
Distributors can submit Option Letter for being an "Opt In" distributor (Opt Out being default) in the specified format to the CAMS - Point of Service (POS) , the list of which is available on AMFI Website . Opt-in/Opt-out letters submitted by corporate ARN holders (except Proprietary concern, Partnership Firm and HUFs) should be submitted on Corporate Letter head and should be signed by Authorised Signatories as registered with AMFI.
To enable the ARN holders to change their status (Opt in/Opt out), it has been decided to keep two half yearly windows available i.e. between March 1st to March 25th and September 1st to September 25th. The new status change will be applicable from the immediately succeeding month.
The options exercised by ARN holders would be registered with AMFI and shared with all Fund Houses. The option exercised for a particular product category will be valid across all Mutual Funds.
All distributors are advised not to resort to any kind of malpractice / mis-selling, including unwarranted splitting of investments and wrong declarations of a "new investor" for receiving transaction charges, as mentioned in the said SEBI circular. If such practice on the part of ARN holder is brought to the notice of AMFI/SEBI, then ARN will be liable for cancellation without notice.
Distributors may also go through the SEBI circular dated August 22, 2011, available on SEBI Website www.sebi.gov.in , for more details.