Mutual fund distributors to get Rs 2,000 for each new investor, says Sebi
MUMBAI: As part of its efforts to increase the participation of new investors including women in the mutual funds space, the market regulator Sebi has introduced a new incentive structure for distributors.
In a circular issued Thursday, Sebi said distributors will now be eligible for up to Rs 2,000 additional commission for bringing in new individual investors (new PANs) from B-30 (beyond the top 30) cities and new women investors from both T-30 (top 30) and B-30 locations.
The new incentive structure will come into effect from next February, Sebi said, adding that the extra commission will be paid over and above the existing trail commission.
However, it added that a distributor cannot claim both the B-30 incentive and the women investor incentive for the same investment.
The circular said the move is aimed at improving outreach, especially in smaller cities and among women investors by encouraging more first-time investors to enter the market.
Explaining the new fee structure, the regulator said for lump sum investments, the extra commission will be 1% or capped at Rs 2,000 per investor, of the first application amount, with a caveat that the investor remains invested for at least a year. In case of systematic investment plans (SIPs), it will be 1% of the total investments made during the first year. The additional commission is capped at Rs 2,000 for every new eligible investor that the distributor brings.
The new incentive structure will not be applicable for schemes like exchange traded funds (ETFs), domestic fund of funds and short-duration debt schemes like overnight, liquid, ultra-short duration and low duration, Sebi said.
The additional commission will come from the 2 bps AMCs already earmark each year for investor education and awareness, the circular said, adding fund houses will have to ensure that distributors do not receive the incentive for the same investor twice.
“Distributors shall be eligible to receive the additional commission for mobilising investments from new women investors from top-30 cities, and in cases where the commission for new investment from B-30 cities has not been claimed for the same woman investor/investment. Dual incentives for the same investor/investment shall not be permitted,” Sebi said.
The move follows Sebi’s decision to scrap the earlier B-30 incentive mechanism amid concerns of misuse.
The circular also said the Association of Mutual Funds in India will work with Sebi to release detailed implementation standards within 30 days. Sebi also noted that changes to offer documents because of this revised incentive structure will not count as a fundamental attribute change.