Sebi empowers MF investors

The Securities and Exchange Board of India (Sebi) on Thursday announced that there would not be any entry load for the new as well as the existing mutual fund (MF) schemes and the investor could decide on the commission that he wishes to pay.

The MF distributor will also have to disclose the commissions that he is getting on the schemes. The Sebi board which met on Thursday announced a slew of path breaking pro-investor measures. Mr C.B. Bhave, the chairman of Sebi, said, “To bring transparency about the commission paid by the investors, the entry load has been removed and the investors would pay an upfront commission to the distributor directly. At the same time, distributors will have to disclose the commission received by them for the different schemes.”

There will not be a cap for the commission distributors could charge but they will have to disclose it to the investors to bring transparency, he added. The Sebi board also approved the concept of anchor investor.

Explaining this concept, Mr Bhave said, “An anchor investor (AI) can subscribe up to 30 per cent of the quota for qualified institutional buyers (QIBs) in the initial public offer (IPO). The minimum size of application by AIs would be Rs 10 crore. The AI would pay 25 per cent margin on application and the balance 75 per cent within two days of the date of closure of the public issue. There will be a lock-in period of 30 days on the shares allotted to these investors from the date of allotment.” Sebi has also rationalised the fee structure of various intermediaries.

Fees charged by brokers for sale and purchase transactions in securities and the derivative segment, filing fee for offer document by mutual funds, FIIs registration fee etc have all been slashed by 50 per cent. Sebi has also decided that an unlisted company making an IPO will have to list the securities on NSE or BSE instead of any other local exchange. It also rationalised the disclosure norms for the right issues, a demand which had been pending for a long time.

Mr Bhave said, “Since rights issues are made to existing shareholders who are in possession of basic information about the company, the disclosure relating to financial statements, litigations, risk factors have been simplified.”