Sebi plans to waive entry load 

PFW Bureua / Aug 24

Sebi is exploring the possibilities of   waiving the entry load for the direct applications received by the Asset Management Companies (AMCs).
 In a letter, Sebi said that the applications received through internet, submitted to AMCs, collection centres and investor service centres, which are not routed through any distributor or agent or broker, may be given waiver in the entry load.
Currently, all the investors irrespective of the mode of entry are required to pay the entry load.

Sebi has sought public opinion on the new proposal. M Damodaran, chairman, Sebi has stated several times that there is a need to streamline regulation regarding  the distribution of the schemes.

Quantum Mutual Fund and Benchmark Mutual Fund are the two fund houses in India which have adopted `direct to investor’ approach to remove the brokerage fee.  The distributors charge 2.25% entry load fee on the new equity schemes.

The MF industry is divided on the Sebi plan to waive entry load. Devendra Nevgi, CEO & CIO, Quantum Mutual Fund said that the direct to investor model will help investors in reducing  cost which will add return to the unit holders. It will also help in checking mis-selling of the schemes to the investors.
However, the distributors are not happy with this proposal. They say that the new proposal will hit the distribution industry.

Earlier, Sebi has stipulated that the loads collected by the AMCs  for each scheme have to be maintained in a separate account and can be utilised towards meeting the selling and distribution expenses.

The MF industry generally utilises the entry load corpus for meeting the commission of the agent or distributor. So, the entry load collected from the investor normally goes towards paying the brokerage of the distributor through whom the application was routed to the AMC.