As per the new SEBI regulations, the AMC can charge a maximum 1 per cent exit load at the time of redemption. SEBI says that this exit load will be applicable for any redemption made after August 1, 2009. However, any customer who has invested in MFs before August 1, 2009 has already paid an entry load of 2.25 per cent and if he redeems his units after 1 August 2009, and if he is charged 1 per cent exit load, then it will be unfair on him. If everyone is charged an exit load of 1 per cent, then all the people who have invested in MFs before August 1, 2009 will actually end up paying 3.25 per cent. This is really unfair.
Please clarify this doubt.
- Akshat Gupta
Your interpretation of the new SEBI ruling is wrong. Current regulations allow schemes to charge a maximum of 7 per cent in loads (entry/exit) while keeping the difference between sale price and repurchase price within 7 per cent of the sale price. Under the new regulations, funds will not be able to charge any entry load, but exit load can go up to 7 per cent. The restriction on exit load is regarding the part that can go towards distributor commissions. It has been mandated that out of the exit load charged under any scheme, except for a maximum of 1 per cent, the redemption proceeds can be maintained by the AMC in a separate account and can be used to pay commissions to the distributors. Any extra exit load has to be credited to the scheme’s assets immediately.
Further, all investments in mutual funds are subject to the load structure that is applicable at the time of investment and any revisions of the load structure is applicable to prospective investors only.
This holds true not only in this case, but also when the fund house voluntarily makes any change in the scheme’s load structure.