In the new year gift to the mutual fund investors, the capital market regulator Securities & Exchange Board of India (Sebi), on Monday, exempted them from payment of entry fee on applications filed directly to the asset management companies (AMC).

“It has now been decided that no entry load shall be charged for direct applications received by the AMCs i.e. applications received through Internet, submitted to AMCs or collection centre/investor service centres that are not routed through any distributor/agent/broker,” Sebi said in a circular here. The exemption would apply for investments in existing schemes with affect from January 4, 2008 and in new scheme to be launched thereafter.

The Sebi circular further said, the entry fee exemption would also apply to additional purchases made directly by the investors under the same folio or for switching from one scheme to the other.

To boost development

These exemptions, Sebi said, were intended “to protect the interests of investors securities and to promote the development of, and to regulate the securities market”.

The growth of mutual fund industry in the past years and the technology available for investments has enabled investors to take informed decisions and to invest in mutual funds through internet and other modes without availing of services of distributors/ agents/ brokers.

There was an overwhelming response in favour of the proposal by Sebi on waiver of entry load for investors who do not route their mutual fund applications through a broker/ distributor. At present irrespective of the mode of entry, investors are required to pay the entry load.

Further, Sebi said that AMCs shall follow the provisions pertaining to informing the unit-holders upon change in load structure as per clause 3(d) of standard observations.

“This is good and positive move and will help the mutual fund industry,” said Delhi-based Taurus Asset Management Company Managing Director R K Gupta while commenting on the Sebi notification. Mr Gupta further said that this decision was overdue and “for the past five years we have been pressing for this exemption.” Sebi’s move, however, would have adverse implications for the intermediaries who have been involved with the mutual fund industry.