Wednesday, January 23, 2008

Question on Entry Load in Direct MF Investments

Rakesh, a reader, sent me the following doubt on entry loads in direct Mutual Fund investments by email:

[I] had a question on the entry load. Recently SEBI(or RBI, i dont remember which) instructed all fund houses not to accept entry loads on direct investment in their mutual funds. While I am very happy with this decision, I am not sure if the investors have a choice in investing directly with the fund houses.
I am particularly looking at DSP ML, Franklin Templeton, Fidelity, Principal and HDFC and wanted to check with you if they have options for investing online. If not would investors get the benefit of no entry load even when we invest in these funds through their franchise outlets.

My response to him was :
  • SEBI is the regulator of securities markets and RBI regulates the banks as well as looks after the national monetary policy. So in Mutual Funds, SEBI is the regulator involved.
  • SEBI's circular on waiver of load for direct application is applicable from Januray 4, 2008 and you can see their circular here. http://www.sebi.gov.in/circulars/2007/mfdcir1007.html
  • Ajay Shah has written about the practical implications in his blog and I quote him, " the practical implication of this effort has been greatly undermined by the requirement that the physical PAN card has to be verified before an online transaction takes place. In other words, the canonical online transaction - the ability for a stranger to be able to come up to the website of a financial firm and put in money - is infeasible. SEBI strongly needs to switch the sequencing around: Require the physical verification of the PAN card after the online transaction and not before." You can see the full post here.
To my knowledge, Quantum MF was the only AMC providing online load free applications even earlier. But now all AMC have to provide a link for online applications on their sites.

Webpage for buying from Franklin Templeton

Any information or experience to share? Do comment or write.

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