Distributors unhappy about SEBI regulations for Mutual Funds in India

Mutual funds and stock brokers are miffed at SEBI regulations on distributors of Mutual funds. The former has cut the distributors margins drastically.

Mumbai, Maharashtra, September 28, 2010 /Washington Bangla Radio - India PRwire/ -- Mutual funds and stock brokers are miffed at SEBI regulations on distributors of Mutual funds. The former has cut the distributors margins drastically.

Mutual fund industry came about for those investors who do not have the time or the risk appetite to invest directly in the equity market. Hence, we saw an increase in the number of distributors of mutual funds. Close to 4% of the Indian population invest in the equity market and out of which close to 25% of equity investors are interested in mutual funds investment. One would think that this step of banishing entry load (fees to the distributor) would lead to an increase in the market share, however this is not the case as penetration is dependent on the efforts of the distributor. "We have seen a drop in the net inflow of equity in the mutual funds from Aug 2009 to Aug 2010 by 5 % from the time the regulation came into effect. By cutting the distributor's fees, the regulators have decreased the distributors motivation to acquire new mutual fund businesses. " Mr Vinod Ohri, Executive Director and President Equities

Close to 40% of the distributors had stopped their businesses due to loss in entry load/ distributors commission. Services that were offered free of cost to investors like transaction confirmations, sums updates, portfolio restructuring are now being offered as a fee based services.

"We have a team of advisors who work based on the requirement of the investors - period of investing, risk appetite and expected return and recommend the most suited product for them. We as distributors have to keep innovating and coming up with various benefits for our investors. For us, investor's growth is what matters to us. As they grow so do we. " Mr Vivek Gupta. He adds, "There are models where we charge a fee for advising our clients and restructuring their portfolios based on their risk appetite. As a distributor of MFs, however, there is a drop in our commissions. We see demand based the performance of the funds and in turn the market performance as well. " Mr Vivek Gupta, MD and Chairman GEPL. Mr Vivek Gupta feels that the online trading platform would be a big opportunity and the clients would be facilitated to trade on mutual funds with ease with the units of mutual funds being held in a demat form.