Mumbai: India’s stock market regulator, the Securities and Exchange Board of India (Sebi), has rejected a plea by the asset management industry to delay the introduction of variable load structures on mutual funds that will enable investors to negotiate the commissions they pay distributors.
Tough stance: The Securities and Exchange Board of India building. Adeel Halim / Bloomberg
The regulator is keen to push a decision soon and may take the matter to its board shortly, a person close to the development told CNBC-TV18.
The mutual fund industry has been trying hard to convince Sebi to push back its proposed decision to introduce variable load structures for mutual funds. Once approved, investors will have the right to negotiate the commission they pay a distributor every time they buy a mutual fund.
Mutual fund houses are concerned that distributors may be reluctant to push their products if the rule comes into force.
”We have suggestions both in favour of this and against it. Some strong views in favour of it and strong views against it,” M.S. Sahoo, a whole-time member of Sebi, told CNBC-TV18. “We have to take a call but there is nothing called the right time...,” Sahoo said. In 1992-93, similar opposition had greeted a decision that required brokers to disclose brokerage fees they charged, Sahoo said.
But the Association of Mutual Funds of India (Amfi) is still trying hard. It has insisted on a so-called multiple class share model if the regulator implements the variable load structure right away.
The multiple-class share model is popular in the US wherein investors have different payment options depending on the amount they are willing to pay upfront. This, Amfi says, will mark a paradigm shift in the pricing of services offered.
“Variable load structure could be implemented right away provided it is a part of the shift,” Amfi chairman A.P. Kurian said. “We just want that it should not be implemented in an ad hoc manner.”