Funds suspended for sale

Kindly throw some light on the reason for the mutual funds being suspended for sale.
- Chirag Shah

Many mutual fund schemes have been suspended for sale after Sebi introduced the 'one scheme, one plan' policy in September 2012.

Earlier fund houses used to offer multiple plans such as retail, wholesale, regular, institutional, super-institutional etc, catering to different classes of investors. That led to allegations that fund houses were treating big investors favourably and putting small ones at a disadvantage.

Fresh investments or planned SIPs in these plans were discontinued in November last year. Existing investments in the discontinued plans have been allowed to continue until they are redeemed or shifted to continuing plans.

Now with introduction of Direct plans, each scheme offers just two plans- regular and direct. Investments routed through agents or distributors become a part of regular plans and those that come directly to AMC enter direct plans.

Direct plans are expected to have a slightly higher NAV, and hence better gains, than regular plans; as they will have low expenses.

This article was originally published on April 03, 2013.