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Our Bureau

Close-ended schemes will not charge entry load

Kolkata , April 4

In a far-reaching move towards rationalisation of initial issue expenses of mutual funds, the Securities and Exchange Board of India on Tuesday said open-ended schemes will be required to meet marketing and expenses connected with sales and distribution from the entry load and not through initial issue expenses.

Initial expenses have been permitted only for close-ended schemes.

Since close-ended schemes will now be allowed to charge initial issue expenses, they will not charge entry load, a SEBI circular issued on Tuesday has indicated.

In the case of close-ended schemes (here initial issue expenses are amortised), for an investor who exits before amortisation is completed, an AMC will have to redeem the units only after recovering the balance proportionate unamortised issue expenses.

In fact, conversion of close-ended or interval schemes to open-ended products (or issuance of new units) should be done only after the balance unamortised amount has been fully recovered from the scheme, the regulator has stated.

Related Stories:
New norms on MF issue expenses
Initial expenses: How aware are we?
Who pays for new fund expenses?

More Stories on : New Fund Offer | Mutual Funds | Regulatory Bodies & Rulings

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