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Should the load's in MF be scrapped ?

Ninad Mondkar (Career Counselor) (117 Points)

06 October 2007

Most of you would know that , recently , SEBI , had asked a very important question, " Should the loads' in direct investment in Mutual Fund be scrapped " . They had asked all the people to send in their position papers' regarding the topic , latest by Sept.12 th , the date is long past due... But , I think we can definately have a discussion about the topic in here...

So, let the communication begin...

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9 Replies

Prakash Popat (3134 Points)
Replied 13 October 2007

Y SEBI asking this questions,ICAI power is being used by SEBI?

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(Guest)

Respected Sir, ICAI has no authority to scrap the load of MF , The authority rests' with SEBI... According to me, yes it is a good decision taken by SEBI to scrap the load of MFs which are directly invested by the customer with the fund house or the collection centre without taking the help of an intermidiary ...

Prakash Popat (3134 Points)
Replied 15 October 2007

As far as Accounting Points R concerned ICAI is Final Authority.Chartered Accountants R Statutory accountants and they R fully authorized as far as State & country Revenue is concerned.

Kamaraj Mani. N (Chartered Accountant - Product Manager) (553 Points)
Replied 15 October 2007

dear Mr. N M Mondkar, & Mr. Namrata,

Thanks for giving an opportunity to discuss something about Load.
My opinion is it should not be scrapped. Why because, if SEBI removes the Entry and Exit load, the number of transaction will be more in the respective fund. (Say example: Equity fund). We know that entry and exit load will be a type of income for AMC for making the transactions/entry(s). If they have to loose this money from the investments/transactions made by the customer then they have to add it with the normal operating expenses (they may ask SEBI to increase the operating expenses %). After deducting the operational expenses, remaining portion only will be distributed as dividend.

What I feel is, it will be more or less same as of now….

So it is need not be scraped. If my view is not fair, please notify…. thanks

Kamaraj Mani. N (Chartered Accountant - Product Manager) (553 Points)
Replied 20 November 2007

Mr. N M Mondkar, There is no further activity in this. Please come n Conclude the info. Please

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Ninad Mondkar (Career Counselor) (117 Points)
Replied 23 November 2007

I do agree with you , Kamraj , that the loads' shouldn't be scrapped & the reasons' are as follows' :- 1) The AMC wouldn't get the kind of penetration that the distributor has got over the years'.. 2) In order to do so the AMC would have to set up various branches at different corners' of India , even which cannot guarantee the success of a fund or a NFO.. 3) The asset under management would definately fall down which would lead to a higher " Expense Ratio ".. As the expense ratio has direct correlation with the AUM.. The higher the AUM the lower would be the expense ratio.. Contd..

Ninad Mondkar (Career Counselor) (117 Points)
Replied 23 November 2007

4 ) The commissions' earned by the insyrance agents' are far more higher than the ( as good as 14 % ) the agents' of MFs.. So according to me this rule should not be restricted to the agnts' of MFs.. 5) If the load is scrapped then the agents would prefer to sell Insurance products ; which would be another jolt in the MF industry as there wouldn't be anyone who could provide quality advice & guide the retail investors' in their decision.. 6) It would be a difficult task for a retail investor if there are any discrepancies' as regads to receipt of Account Statement , redemption of units' , purchase of units' & selling of units' etc. as he has to deal with an AMC directly .. 7) Most of the position papers' received by the SEBI has advocated the proposa in the -ve due to the reasons' mentioned overleaf.. Contd..

Ninad Mondkar (Career Counselor) (117 Points)
Replied 23 November 2007

So I personally hope that this proposal wouldn't be accepted.. Warm Regards' NM

Kamaraj Mani. N (Chartered Accountant - Product Manager) (553 Points)
Replied 03 January 2008

Entry load is finally off the back of mutual fund investors. In a circular, the Securities and Exchange Board of India (SEBI) on Monday said investors will not be charged an entry load while directly applying with a mutual fund. This means an investor will not have to pay the entry load of 2.25% for equity funds unless he avails the services of a distributor.