Steps to re-energise Mutual Fund Industry
Summary
This circular outlines measures to re-energize the mutual fund industry by allowing additional Total Expense Ratio charges for geographic penetration and permitting service tax on specific fees. It mandates a single plan structure with separate direct investment options, expands distribution channels to include new cadres of distributors, and introduces cash transaction allowances for small investors. The document also establishes prudential limits on debt scheme concentration, requires monthly portfolio disclosures, and sets effective dates for various provisions.
Text
Additional TER can be charged up to 30 basis points on daily net assets... if the new inflows from beyond top 15 cities are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever is higher.
The additional TER on account of inflows from beyond top 15 cities so charged shall be clawed back in case the same is redeemed within a period of 1 year from the date of investment.
Mutual funds/AMCs shall make complete disclosures in the half yearly report of Trustees to SEBI regarding the efforts undertaken by them to increase geographical penetration of mutual funds and the details of opening of new branches, especially at locations beyond top 15 cities.
Mutual funds /AMCs may charge service tax on investment and advisory fees to the scheme in addition to the maximum limit of TER as prescribed in regulation 52 of the Regulations.
Service tax on other than investment and advisory fees, if any, shall be borne by the scheme within the maximum limit of TER as per regulation 52 of the Regulations.
Service tax on exit load, if any, shall be paid out of the exit load proceeds and exit load net of service tax, if any, shall be credited to the scheme.
Service tax on brokerage and transaction cost paid for asset purchases, if any, shall be within the limit prescribed under regulation 52 of the Regulations.
Mutual funds/AMCs shall launch schemes under a single plan and ensure that all new investors are subject to single expense structure.
Existing schemes with multiple plans based on the amount of investment (i.e. retail, institutional, super-institutional, etc) shall accept fresh subscriptions only under one plan.
Mutual funds/AMCs shall provide a separate plan for direct investments, i.e., investments not routed through a distributor, in existing as well as new schemes.
Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV.
A new cadre of distributors, such as postal agents, retired government and semi-government officials... retired teachers... retired bank officers... and other similar persons... shall be allowed to sell units of simple and performing mutual fund schemes.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Steps to re-energise Mutual Fund Industry. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.