The Securities and Exchange Board of India (Sebi) is considering a proposal to remove the load for direct applications in mutual fund (MF) schemes. Currently all investors, irrespective of the mode of entry, are required to pay an entry load of 2.25 per cent for equity funds. “Keeping in view the interest of investors, Sebi is now considering giving a waiver in the entry load for direct applications received by asset management companies (AMCs), ie applications received through the internet, submitted to AMC or collection centre/ investor service centre that are not routed through any distributor/ agent/ broker,” the Sebi proposal stated while inviting public comments.

According to AMFI chairman A P Kurien, “This is a welcome step but essentially for investors who are confident and fully aware and knowledgeable about mutual fund investing, and understand its risks and returns. Others might need the help of distributors who provide an advisory role.” This is a very positive and “constructive step”, said Financial Planning Standards Board India (FPSBI) CEO Ranjeet Mudholkar. “In fact, we had recommended this along with disclosure of commissions to agents. Since no load is payable on purchase or sale of units, the entire corpus will be put to work.” This would help in other ways too, he added. “From the financial planning perspective, this would encourage more fee-based advice, which in turn would help investors get the right asset allocation.”

Fund houses have welcomed the move. “Fidelity supports the proposal as it is in the investors’ interest,” a Fidelity spokesperson said. This is an investor friendly measure, said JP Morgan AMC CEO Krishnamurthy Vijayan. “But the distributor does add value in terms of giving advice to the investor. Finally, it is the investor who has to decide which way he wants to go.”

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