Association of Mutual Funds in India (Amfi) has strongly taken up the issue with Sebi regarding the fund houses offering the same commission to the distributors in line with the insurance companies providing higher commission on the uniform products like Unit Linked Insurance Product (ULIP).
The MF industry on an average provides a commission of 4% on any scheme including unit link kind of products. Sebi allows the funds houses to charge a load of 2.25% from all types of schemes. And the fund houses like to give commission to the distributors beyond this set limit than they have it from the profits of the Asset Management Company (AMC).
Contrary to this, the insurance companies offer 30% to 40% commission to the agents on the first year and around 10% in the subsequent years on the ULIP.
Commenting on this, AP Kurian, chairman, Amfi, said, “We have taken up this issue with Sebi as it regulates MF industry. We are discussing this issue with the regulator.”
Taking a cue from Kurian, UK Sinha, CEO, UTI Mutual Fund, said that there should be common regulations on the uniform products like unit linked schemes which both the MFs and insurance sector can offer to the investors.
“The MF industry is not able to come out with a unit linked product as the commission structure favours insurance companies. The product structure, disclosure and know your client (KYC) norms is titled towards insurance sector. We have raised this issue with the regulator and waiting for its response,” he said.
Sinha, who is also the chairman of CII national committee on Mutual Funds, said, “We are going to discuss this issue at length at CII Mutual Fund Summit 2008 that will be held on June 18 in Mumbai.”
The MF industry is of the view that MF industry getting a level playing field with the insurance sector can enhance the asset under management (AUM) of MF industry, which crossed Rs 6 lakh crore in May.