With an aim to provide incentives to mutual funds’ distributors for selling systematic investment plans (SIPs), industry body AMFI has relaxed the norms for upfront commission payments for such schemes.

The decision comes against the backdrop of concerns over a decline in fresh sales after huge inflows witnessed in the last one year.

The new fee structure would help in attracting retail clients.

Under the new norms, mutual fund houses are allowed to pay up to one per cent upfront commission for a three-year period, rather than monthly commission on the instalments for SIPs.

“Mutual Fund houses can now offer three years’ upfront commission at the time of SIP enrolment to distributors. This upfront commission is subject to a cap of maximum one per cent, on SIPs of up to Rs 10,000 per month,” Quantum Mutual Fund chief executive Jimmy Patel told PTI.

“However, this rule would apply on SIPs having a minimum tenure of three years,” he added.

SIP is an investment vehicle offered by mutual funds to investors, allowing them to invest using small periodical amounts instead of lumpsums. The frequency of investment is usually weekly, monthly or quarterly.

The revised commission structure has come into effect from July 1, 2015.

Association of Mutual Fund Industry in India (AMFI) had asked the fund houses to cap upfront fee payment to distributors at one per cent, starting April 1, as the capital markets regulator SEBI raised concerns over high commissions being doled out to mutual fund agents.

Over the last one year, the industry was pushing close-ended schemes by paying fees as high as 6-8 per cent to distributors.

Earlier, AMFI had sought suggestions from fund houses on the new commission structure.

Related Topics