MUMBAI: The Securities and Exchange Board of India (SEBI) has scrapped transaction charges paid to mutual fund (MF) distributors, with the change taking effect immediately.
The move aims to simplify distributor compensation and enhance transparency in the mutual fund ecosystem.
Until now, asset management companies (AMCs) were allowed to pay transaction charges to distributors for investments above a threshold – typically a minimum subscription of Rs10,000. This provision was part of SEBI’s Master Circular for Mutual Funds dated June 27, 2024.
The decision follows a public consultation in May 2023 and an industry consultation in June this year. SEBI said feedback indicated that as distributors of mutual funds act as agents of AMCs, they should be remunerated under standard commission structures rather than through transaction-based charges.
As a result, the relevant provisions in the master circular have been deleted, effectively ending the practice. AMCs can continue to pay distributors commissions in line with applicable rules, but the specific transaction charge framework has been removed.
Market participants said the change would streamline processes, reduce administrative complexity, and make distributor remuneration more transparent for investors.
