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.

The following are important aspects of Transaction Charges :

• Transaction Charges (TC) in respect of investments sourced by Distributors :

  1. In respect of new investors i.e. first time ever investor in any Mutual Fund (for subscription / SIP only), a Fund House is allowed to pay Rs. 150/- as TC only where the transaction / SIP commitment value is Rs. 10000/- and above.
  2. Where such a transaction is from an existing investor, the corresponding TC will be Rs. 100/-.
  3. In respect of systematic investments (SIP only), a TC of Rs. 100/- is payable in 4 equal installments, starting from the 2nd to the 5th installment, provided the total commitment towards SIP is for Rs.10000/- or above.
  4. Unit holder's statement of account will reflect subscription amount, transaction charges and net investment.

  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.

1. Opt in - An Opt In distributor is someone whose clients will be levied with transaction charges as described above, irrespective of the Fund where an application is submitted.
2. Opt Out - An Opt Out distributor is someone whose clients will not be levied any transaction charge by any Fund.
3. Please note that "Opt out" will be the DEFAULT OPTION for all distributors, unless opted otherwise.
4. ARN holders who have ‘opted-in’ for levy of transaction charges in terms of above referred SEBI circulars are eligible for transaction charges in respect of mutual fund transactions in respect of their clients routed through stock exchange platforms viz. BSE Star MF/ NSE NMF II platforms, as well. However, the mutual fund transactions routed through stock exchanges through stock brokers will not be covered for transaction charges.
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The following are the product categories that currently exist.

• Sr. No.	Type of Product	Opt-in	Opt-out
  1	Liquid Fund/ Money Market Fund
  2	Income / Debt Oriented schemes other than Liquid Fund/ Money Market Fund
  3	Growth/Equity Oriented Schemes
  4	Hybrid Schemes
  5	Solution Oriented Schemes
  6	Other Schemes
  7	Fund of Funds - Domestic

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  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.