Markets regulator stands its ground

uckling under pressure from distributors, mutual fund industry body, Association of Mutual Funds in India (AMFI), is lobbying hard to dispense with a proposed move to make it mandatory to disclose individual agent commission in the account statements sent to investors, but regulator Sebi is firm on its stand.

Sebi is of the view that such disclosure will help boost transparency as investors have a right to know what portion of their money the mutual fund is giving to the distributor as commission, a senior official said.

The regulator also feels that the mutual fund industry would be a ‘net gainer’ in the longer term as voluntary disclosure of such kinds will help address ‘trust deficit’ with investors, the official said, while adding that Sebi would have to step in with an order if fund houses did not adopt this practice on their own.

While many fund houses were initially keen to adopt this practice, they developed cold feet after distributors and financial advisors reacted angrily and even threatened to boycott those MFs that were supportive of this proposal.

Despite repeated attempts, executives at all leading fund houses refused to speak on record about the issue, saying it has become ‘a very sensitive matter’ as any formal position against the proposal could be seen as ‘anti-investor’ while distributors would hit back if they supported the move. Repeated queries sent to AMFI and its top functionaries, remained unanswered in this regard, as also on whether the industry body was buckling under pressure of the distributors.

When contacted, Foundation of Independent Financial Advisors chairman Dhruv Mehta said, “We are not against disclosing individual distributor commission in the account statements sent to investors but all the expenses should be disclosed. Why there is selective disclosure?”

Playing it safe, AMFI has now approached Sebi but the regulator is firm on its stand that there is a need to making the distribution commissions more transparent.

The regulator feels that such a step will help address the issue of trust deficit about commission payouts, something which has been a matter of serious concern to the investors.

If the new decision gets implemented, it will force every fund house to add commission payout details — with names and amount — in every statement of account. Till now, the statement of account sent to each investor includes details about their folio number, investment amount, gains/loss, and certain KYC details. — PTI