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MFs to disclose agent fees to investors

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Come October, mutual fund (MF) investors will be able to see how much their MF agents have been earning for their services relating to the investments. Investors will also know how much the CEO, CIO and COO of their fund house is being paid annually.
Raising the bar for transparency in the financial services sector, markets regulator Sebi on Friday asked all fund houses to disclose all this information, along with expense ratio and the ratio of the CEO's remuneration to the average pay of other employees of the fund house.
The Sebi circular said that all fund houses will disclose the “amount of actual commission paid by MFs to distributors (in absolute terms) during the half-year period against the concerned investor's total investments in each MF scheme. The term `commission' here refers to all direct monetary payments and other payments made in the form of giftsrewards, trips, event sponsorships, etc by MFs to distributors“.
What this means is that, if as an MF investor you have an investment worth Rs 1 lakh in an MF scheme on which your agentdistributor earned a commission of 0.4% between October 1and March 31, 2017, a column in your consolidated account statement will show that from your total invest ments Rs 400 has been paid to your agentdistributor.
In addition, like for listed companies, fund houses will also need to disclose the annual salary of those officials earning Rs 60 lakh or more. Sebi also allowed fund ma nagers to deploy funds mobilized through a new fund offer NFO) in Collateralized Borrowing and Lending Obliga ion (CBLO), a money market nstrument, before the NFO closed. However, in such cases, the fund will not be allowed to charge any investment management and advisory fees on those funds.
The move to disclose commissions is expected to generate a backlash from the distributor community , which has been opposing the regulator's plans to disclose such information to investors. As a result, AMFI -the industry body which, under Sebi directive, was to take a decision on this contentious issue -passed on the files to the regulator again.
When AMFI was deliberating on the issue, some of the top fund industry officials had to face distributors' ire, including on social media.
Times of India, New Delhi, 19th March 2016

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