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FAQs : Impact
of SEBI regulations and
Fee Structure on Mutual Funds |
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1 |
What is the new SEBI regulation all
about? |
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2 |
Do I have to
pay any Entry Load for mutual fund purchases made after August 01,
2009 ? |
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3 |
How does the new fee structure apply to my unit holdings of Rs. 8
lakhs or more? |
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4 |
How does the new fee structure apply to my unit
holdings of less than Rs. 8 lakhs? |
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5 |
Is Service Tax included in the
Transaction Fees? |
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6 |
How is the
“cumulative value” of my MF portfolio calculated for Transaction
Fees? |
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Is the
“cumulative value” calculated on my Equity-based holdings only? |
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8 |
I am an NRI
customer and have NRE and NRO accounts with ICICIdirect.com. What
if the value of my MF holdings across both these is Rs. 10 lakhs? |
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What if I have more than Rs. 8 lakhs
in my Demat balance? |
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10 |
Will the charges be applicable to
all categories of schemes or only for Equity-based schemes? |
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11 |
If I invest in liquid funds which do
not have entry/exit loads, will I still be charged any transaction
fees? |
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12 |
Do Transaction
Fees apply to redemptions as well? |
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13 |
How can I
benefit more from the new fee structure? |
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14 |
What happens to
my existing SIPs? |
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15 |
My SIP value is
typically Rs. 1000/- or less. How can I benefit from the new fee
structure? |
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16 |
Do I need to
take any action to avail of the new fee structure through
ICICIdirect.com? |
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17 |
How do I
transfer my MF holdings from other distributors to ICICIdirect.com? |
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18 |
What is the
impact of the new regulations on Exit Loads? |
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19 |
In light of the
new SEBI guidelines, what would be my effective purchase price? |
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20 |
I have invested
in a New Fund Offer (NFO) of a scheme launched prior to August 1,
2009. Will I too get the benefit of the new SEBI Guidelines on
entry load? |
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21 |
Will I be
charged Transaction Charges on investments made after August 01,
2009, in NFOs launched prior to August 01, 2009? |
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22 |
Why does
ICICIdirect.com charge Transaction Fees when Entry Load is 0%? |
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What is the new
SEBI regulation all about? |
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As you may be aware, the
Securities Exchange Board of India (SEBI), has instituted a new
regulation which will take effect from August 1, 2009, and has an
immediate impact on what you pay whenever you buy a mutual fund
scheme.
Until now, all purchases of Equity-based mutual fund schemes
involved an ‘entry load’ which was typically 2.25% of the total
amount. This was taken from the amount you invested and passed on
to the distributor as commission.
For example, if you invested Rs. 1,00,000/- in an equity based
mutual fund scheme. Out of this, an amount of Rs. 2,250/- (i.e.
2.25%) was earmarked as sales commission to the distributor of the
scheme. Therefore, the amount that you invested was actually Rs.
97,750/- (i.e. Rs 1,00,000 minus Rs. 2,250/-)
With effect from August 1, 2009, your entire Rs. 1,00,000/- will
be invested in the mutual fund scheme of your choice.
In addition, distributors may charge you transaction fees or
charges as per their respective fee structures. You can get more
details on the fee structure that applies to your investments with
ICICIdirect.com, by
clicking here.
If you wish to read the exact SEBI circular on this, please do
click here. |
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Do I have to
pay any Entry Load for mutual fund purchases made after August 01,
2009 ? |
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No. Prior to the implementation of the SEBI guideline, an entry
load of typically 2.25% was charged on all Equity-based Mutual
fund purchases. As per the new guidelines issued by SEBI, with
effect from August 1, 2009, entry load will not be charged on
purchases in existing mutual fund schemes or on schemes launched
thereafter. |
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How does the
new fee structure apply to my unit holdings of Rs. 8 lakhs or
more? |
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If the cumulative MF holdings you have with us is Rs. 8 lakhs or
more, you actually pay NOTHING. The "cumulative value" will be
taken as per Value at NAV of your entire MF holdings, at the time
of order placement, as seen on your MF Unit Holdings page.
Transaction charges will be applied as per the new fee structure,
accordingly.
If you have any MF holdings which have not been done through
us, you can transfer them to ICICIdirect.com without any extra charge,
so that you can enjoy these benefits on the cumulative unit
holdings. (Click here to know more about the Transfer in process) |
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To illustrate this
with the help of some examples: |
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On Investing... |
Entry Load |
Transaction Fee
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Net Savings |
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Old
Structure (Rs.)* |
New
Structure (Rs.) |
New
Structure (Rs.) |
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Rs.
75,000/- as a monthly SIPs for 12 months |
20,250/- |
Nil |
20,250/- |
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Rs. 8,00,000/-
as a lumpsum in Mutual Fund |
18,000/- |
Nil |
18,000/- |
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*Old
structure charges have been calculated @2.25% Entry Load as
an illustration |
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How does the
new fee structure apply to my unit holdings of less than Rs. 8
lakhs? |
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If the cumulative MF
investment you have with us is less than Rs. 8 lakhs, you only pay
nominal charges on each transaction.
The "cumulative value" will be taken as per Value at NAV of your
entire MF holdings, at the time of order placement, as seen on
your MF Unit Holdings page. Transaction charges will be
applied as per the new fee structure, accordingly. |
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To illustrate this
better: |
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On Investing... |
Entry Load
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Transaction Fee
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Net
Savings |
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Old
Structure* (Rs.) |
New
Structure**
(Rs.) |
New
Structure
(%) |
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Rs. 500/-
as a monthly SIP for 12 months |
135/- |
90/- |
33% |
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Rs. 1,000/-
as a monthly SIP for 12 months Mutual Fund |
270/- |
180/- |
33% |
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* |
Old structure charges have
been calculated @2.25% Entry Load as an illustration;
Service |
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Tax will be levied as
applicable. |
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** |
Transaction Fees have been calculated @1.5% for SIP as
they are lower than Rs. 30 in these |
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cases. |
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On Investing... |
Entry Load |
Transaction Fee
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Net
Savings |
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Old
Structure* (Rs.) |
New
Structure**
(Rs.) |
New
Structure
(Rs.) |
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Rs. 10,000/-
as a monthly SIPs for 12 months |
2,700/- |
360/- |
2,340/- |
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Rs.
1,00,000/-
as a
lumpsum in Mutual Fund |
2,250/- |
100/- |
2,150/- |
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* |
Old structure charges have
been calculated @2.25% Entry Load as an illustration;
Service |
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Tax will be levied as
applicable. |
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** |
Transaction Fees have been
calculated @ Rs.30/- for SIP as that is lower
than 1.5% in this |
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case. |
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Is Service Tax
included in the Transaction Fees? |
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No. Service Tax
will be levied additionally on the Transaction Fees, as
applicable. |
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How is the
“cumulative value” of my MF portfolio calculated for Transaction
Fees? |
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The "cumulative value" will be taken as per Value at NAV of your
entire MF holdings, at the time of order placement, as seen on
your MF Unit Holdings page. Transaction charges will be
applied as per the new fee structure, accordingly.
As an example, while placing a new lumpsum order, if the MF unit
holdings value in your account, as per ICICIdirect.com records is Rs.
5 lakhs (as per the Value at NAV), the system will levy a
transaction charge of Rs. 100/- on the said transaction. |
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Is the
“cumulative value” calculated on my Equity-based holdings only? |
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No. The entire MF holdings with ICICIdirect.com are taken to
calculate the total value of your unit holdings, at the time of
order placement, irrespective of the category or sub category of
schemes chosen. |
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I am an NRI
customer and have NRE and NRO accounts with ICICIdirect.com. What
if the value of my MF holdings across both these is Rs. 10 lakhs? |
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For the purpose of calculating transaction fees applicable, each
of your accounts will be treated as a separate entity, and unit
holdings across both will not be combined.
Accordingly, even if the total value of unit holdings across both
your accounts exceeds Rs. 8 lakhs as per Value at NAV, relevant
transaction charges will be levied if the account from which the
transaction is being made shows unit holdings less than Rs. 8
lakhs, at the time of placing the order. |
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What if I have
more than Rs. 8 lakhs in my Demat balance? |
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For the purpose of calculating transaction fees applicable, your
Equity and MF portfolios will be treated as separate entities, and
holdings across both will not be combined.
Accordingly, even if the total value of holdings across both these
exceeds Rs. 8 lakhs, relevant transaction charges will be levied
if your MF unit holdings (as per Value at NAV) stands at less than
Rs. 8 lakhs, at the time of placing the order. |
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Will the
charges be applicable to all categories of schemes or only for
Equity-based schemes? |
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The new fee structure applies to all Mutual Fund purchases
(excluding those in Liquid fund schemes), started on or after
August 1, 2009. Accordingly, any purchase in Liquid funds will not
be levied transaction fees, irrespective of the value of your MF
unit holdings. |
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If I invest in
liquid funds which do not have entry/exit loads, will I still be
charged any transaction fees? |
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The new fee structure applies to all Mutual Fund purchases
(excluding those in Liquid fund schemes), started on or after
August 1, 2009. Accordingly, any purchase in Liquid funds will not
be levied transaction fees, irrespective of the value of your MF
unit holdings. |
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Do Transaction
Fees apply to redemptions as well? |
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No. Presently, the new fee structure applies only to all Mutual
Fund purchases (lumpsum or SIPs), started on or after August 1,
2009, irrespective of the category or sub category of schemes
chosen.
Accordingly, there are no transaction fees applicable for
redemptions or switch out from any scheme, including for
Systematic withdrawal plans (SWPs).
There could be scheme-related charges like Exit Load applicable on
your redemptions, as specified by the fund house. Please review
the Exit Load applicable on your investment from ICICIdirect.com,
before you to choose to redeem any units. |
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How can I
benefit more from the new fee structure? |
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Even though the charges applicable on your MF investments with
ICICIdirect.com are nominal, there are a number of ways to benefit
from the new fee structure. |
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1) |
If your mutual fund holdings of over Rs. 8 Lacs with
ICICIdirect.com, you will
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not only benefit
from waiver of all transaction charges , but you will also have
access to a comprehensive view of your portfolio and our Research
& Advisory recommendations |
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2) |
If you typically invest in SIPs of smaller amounts (say, less than
Rs. 2,000/-) |
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spread across
various fund schemes, you already benefit from our reduced fee
structure of Rs. 30/- or 1.5% whichever is lower. In addition, you
may also want to consider reducing the spread and consolidating
your SIP investments across fewer fund schemes, such that each
investment amounts to Rs. 2,000/- or more, and you benefit even more
from reduced transaction fees |
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3) |
Similarly, if you
invest in lumpsum of smaller amounts (say, less than |
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Rs. 20,000/-) spread across various fund schemes, you may want to
consider reducing the spread and consolidating your lumpsum
investments across fewer fund schemes, and benefit from reduced
transaction fees on your investment |
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What happens to
my existing SIPs? |
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Your existing SIP investments (registered on or before July 31,
2009) will continue to attract Entry Load charges applicable for
each fund scheme. The new fee structure will not be applicable for
these SIPs.
For example, if you started a SIP for 12 months (once every month)
on July 2, 2009 your SIP will be in force till June 2010 and
transactions will be charged as per the existing Entry Load
applicable for the specific fund scheme.
However, a new SIP registered on or after August 1, 2009 will not
be charged any Entry Load, but will carry transaction charges as
per our new fee structure. |
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My SIP value is
typically Rs. 1000/- or less. How can I benefit from the new fee
structure? |
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Your existing SIP investments (registered on or before July 31,
2009) will continue to attract Entry Load charges applicable for
each fund scheme. The new fee structure will not be applicable for
these SIPs.
A quick calculation will show that, if you typically have multiple
SIPs of Rs. 500/- or Rs. 1000/- per month, as per your existing
charge structure you will end up paying 2.25% as Entry Load on
these investments.
If you switch to our new reduced fee structure, your SIP
investments can benefit by the lower transaction charges of Rs.
30/- or 1.5% of the investment amount, whichever is lower.
In addition, you may also want to consider reducing the spread and
consolidating your SIP investments across fewer fund schemes, such
that each investment amounts to Rs. 2,000/- or more, and you
benefit even more from reduced transaction fees.
You can switch your existing SIP investments to the new fee
structure by simply canceling the remaining schedule on your old
SIP and starting a new one. |
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Do I need to
take any action to avail of the new fee structure through
ICICIdirect.com? |
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No. You do not need to do a thing. The new fee structure is
integrated with ICICIdirect.com’s transaction system such that all
charges will be automatically applied to your new investments, at
the time of order placement. Accordingly, any lumpsum purchase or
start of a new SIP (excluding in Liquid funds) on or after August
1, 2009 will be as per the new fee structure applicable. |
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How do I
transfer my MF holdings from other distributors to ICICIdirect.com? |
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If you have any MF holdings which have not been done through us,
you can transfer them to ICICIdirect.com without any extra charge,
so that you can enjoy these benefits on the cumulative unit
holdings. You will need an NOC from your existing broker if you
wish to transfer your MF holdings to ICICIdirect.com. Please
click here to know more about the Transfer in process.
Alternatively, you can start making future purchases through
ICICIdirect.com and gradually shift your existing unit holdings by
redeeming all or some of the units. (Please note that redemptions
may have Exit Load and Tax implications on your investment
portfolio.) |
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What is the
impact of the new regulations on Exit Loads? |
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There is no impact of the SEBI regulations on Exit Loads. Exit
Loads will continue to be levied on specific fund schemes as per
the offer document and subject to revision by the Asset Management
Companies i.e. Fund houses.
Please review the Exit Load applicable on your investment from
ICICIdirect.com, before you to choose to redeem any units, as
certain schemes may now attract Exit Loads even if they earlier
did not do so. |
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In light of the
new SEBI guidelines, what would be my effective purchase price? |
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Effective Purchase Price is the sum of the NAV, transaction
charges and service charges divided by the number of units
purchased. For example: Let's say you purchased 1,000 MF units for
Rs. 10,000/-. If the transaction and service charges applicable
are Rs. 100/- and Rs. 10.30/- respectively, then the effective
purchase price per unit will be Rs. 10.11/- (i.e. Rs.
10,110.30/1000 units). It is the price which you actually pay to
purchase a single unit of a Mutual Fund Scheme. |
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I have invested
in a New Fund Offer (NFO) of a scheme launched prior to August 1,
2009. Will I too get the benefit of the new SEBI Guidelines on
entry load? |
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No. Entry load has been abolished only with effect from August 1,
2009. Any investment made by you in an NFO which was launched
prior to August 1, 2009 will continue to attract Entry Load and
other charges as specified in the offer document. |
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Will I be
charged Transaction Charges on investments made after August 01,
2009, in NFOs launched prior to August 01, 2009? |
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Yes. Although upfront Transaction Charges and Service Tax (ST)
would be charged to you on placing a purchase order in NFO
launched prior to August 1, 2009, such charges will be refunded
subsequently. |
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Why does
ICICIdirect.com charge Transaction Fees when Entry Load is 0%? |
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ICICIdirect.com is a cutting edge full-service transaction
platform available 24x7, allowing you to invest in a wide range of
Investment & Protection products. The product range is backed by
our award-winning Research and Advisory service and supported by
Financial Planning tools that help you review your financial
health and align your investments to your objectives.
You can avail all this online through ICICIdirect.com as well as
offline through
ICICIdirect - The Neighbourhood Financial Superstore in your
vicinity, where you can interact with a trained and well informed
Relationship Manager.
All this is brought to you at no additional charge, and our
nominal fee structure goes only a small way in ensuring that you
benefit from the ICICIdirect.com advantage of Cost, Convenience and
Commitment at all times. |
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