SEBI waives entry load of mutual funds

In what is being called as a new year gift, SEBI waives the entry load for mutual funds in case of direct applications. There has been huge commentary on the issue right since the time SEBI floated the idea. I covered much of it here.

So, what does direct application mean? It means if you download the application from the fund’s website, or submit the application to various distribution centres of the fund, you are not required to pay the entry load. The impact on brokers is going to be small initially, but is expected to be large over a period of time.

SEBI has initiated some quick reforms in the securities market in December 2007. I have covered a few here. It has also made way to allow short-selling in the markets.

Update:

1. Thanks to Vikram who commented saying that direct application means

1. Application without broker code
2. Application with “DIRECT” written in the space provided for distributor code

2. Ajay Shah has written an interesting post on the subject

8 Responses to “SEBI waives entry load of mutual funds”

  1. Vikram Says:

    “So, what does direct application mean? It means if you download the application from the fund’s website, or submit the application to various distribution centres of the fund, you are not required to pay the entry load.”

    Above is incorrect. Direct application is

    1. Application without broker code
    2. Application with “DIRECT” written in the space provided for distributor code

  2. Mayukh Chakraborty Says:

    Yes, Mr. Vikram is correct. Without any ARN Code and marking any Application Form with “DIRECT” tag will be treated as direct application. Moreover purchasing units of MF or transaction on Net will also be treated as same.

  3. SEBI further clips mutual fund earnings « Mostly Economics Says:

    […] further clips mutual fund earnings I had earlier pointedout that SEBI has waived the entry load for those investors that purchase mutual funds directly from […]

  4. ram Says:

    I have invested in reliance Infrastructure fund and i have done through IDBI Bank. I was told that there is entry load but i did mentioned that recently SEBI has scraped the entry load.

    Is entry load has charged to me because i have done it through IDBI bank. i Really dont know that if we do it direct the there is no entry load.

    Please suggest.

    • Amol Agrawal Says:

      Hi Raghu,

      The entry load was eased in two stages:
      1) In first stage the entry load was removed from direct applications e.g. if you download the form from website of MF and send it or buy the form from the sales office of the MF. In such case your form was to have direct written on the broker code

      2) This has been done recently where all entry loads are eased. Now you have to decide how much load you want to pay the broker.

      Reliance Infra Fund is a new fund whose FPO was announced before the second decision was taken by SEBI. Hence, entry load will still apply as you have brought from IDBI Bank. You could have instead downloaded the form directly from the website or brought from Reliance MF Sales office.

      However, you should still check with Reliance MF whether the second decision of SEBI applies to the infra fund or not

  5. AB Says:

    Hello Vikram/Amol

    Sorry I am confused. If the broker code is DIRECT, i.e. I do it online, do I still have to pay the entry load?

    Please clarify.

    • Amol Agrawal Says:

      Hi AB,

      If the Broker Code is direct then you do not have to pay the entry load. However, it could be that AMC still charges you an entry load. It has been seen the practice of no load has not really picked up and there are confusions. So please tell them not to charge an entry load.

  6. AB Says:

    Hi Amol

    thanks for your input. I guess its clear now that from aug 01 2009, if one submits the application direct i.e. with DIRECT code then there will be no entry load.

    Also, if this is thru an agent then one can negotiate for the commission.

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