SEBI came up quitely with a wonderfull new year gift to us.
This news came up as article in many newspapers but people are not sure how important it is.
SEBI has been mulling over the issue of abolishing entry loads into mutual funds from very long and finaly in a simple statment told the mutual fund industry to stop collecting the extra money from investors who directly approach the mutual fund house.
Traditionally a distributor/agent would provided educated advice to investors and this extra money ( normally 2.25%) would be partially handed over to that agent/distributor as commission for their service ( Not the entire 2.25% as the AMC tend to claim but right from 0.5% to 1.5% on case basis).
What India is witnessing right now is quite the opposite. The agents are in 8 out of 10 cases, misselling the ill informed investor into new funds where the get hefty commissions (SEBI allows loads upto 6%) on new fund offers ignoring the advice portion.
In a view to curb this malaice, SEBI thinks banning the commission for people who can take educated judgement would definetly in the short run give the agent a run for his business but overall a healthy sign to AMC as their assets under management would grow, investors wealth would grow and only the lazy agent/distributor would be pulled up to serve the industry better.
Three cheers to SEBI.