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Sebi Miffed Over Pay Outs To MF Distributors

Monday, March 23, 2015
By A Business Reporter

Sebi has expressed concern over the disproportionately large amount of commission paid to mutual fund distributors, but the market regulator said it would be good if the industry puts a cap on the upfront fee. Industry body Association of Mutual Funds of India (AMFI) plans to set one per cent cap on upfront commission.

"Sebi would hesitate to directly prescribe the commission and would be happy if the industry does it. Sebi has a concern that if a disproportionately large amount of commission is being paid, and certain anomalies have crept up, Sebi is uncomfortable," Sebi chairman U K Sinha said when asked about AMFI's plans of capping one per cent upfront commission. According to industry data, some banks are getting more than 50 per cent of their brokerage commissions from single MFs, indicating a special focus on selective fund houses, which mostly happen to be their own group entities.

Market insiders say that MF houses are giving such high fees to distributors in order to attract more investors. Earlier, AMFI voluntarily agreed that mutual funds would move to a trail commission structure after Sebi expressed concern over the rise in upfront fee paid to distributors. The regulator is concerned over the issue as it could hurt the profitability of small fund houses. There are a total of 45 mutual funds in the country and their total Average Asset Under Management currently stands at over Rs 12 lakh crore.

MF Updates
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Retirement fund body EPFO is likely to appoint fund managers for a three-year term starting April 1 at its trustees' meet scheduled on March 31. Asset management firms ICICI Securities Primary Dealership, Reliance Capital AMC and HSBC AMC have emerged as top bidders for managing the huge corpus of the EPFO. The body has a corpus of over Rs 6.5 lakh crore and it is expected to get an incremental deposit of Rs 80,000 crore during this fiscal. The other shortlisted bidders among the six asset management firms are UTI AMC, ICICI Prudential and Birla Sun Life AMC. The Employees Provident Fund Organisation's (EPFO) apex decision making body, the Central Board of Trustees (CBT), will deliberate on the proposal to appoint appropriate number of fund managers to manage its corpus selected through bidding process and allocate funds amongst them, the agenda listed for the meeting said.

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Yes Bank will consider evaluating acquisitions for setting up of mutual fund business. The board of the bank had already approved the proposal to seek approval from regulators for setting up an asset management business.

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