Investment regulatory body, SEBI, gives the green light for mutual funds to compensate distributors for transaction expenses
In a significant move aimed at enhancing transparency and simplifying the distributor compensation framework, the Securities and Exchange Board of India (SEBI) has announced the immediate abolition of transaction charges for mutual fund distributors. This decision follows extensive industry and public consultations, as outlined in SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/115, issued on August 8, 2025.
Under the previous framework, distributors received transaction charges for subscriptions exceeding ₹10,000. The charges amounted to ₹100 per ₹10,000 for existing investors and ₹150 for new investors. However, SEBI concluded that since distributors act as agents of Asset Management Companies (AMCs), they should be remunerated directly by AMCs rather than through transaction charges paid by investors.
The decision to abolish transaction charges aims to streamline the distributor compensation framework and ensure transparency. The change was effective immediately following the announcement.
Meanwhile, several companies have reported their Q1 profits. Tata Motors, SBI, GRSE, Naukri, Voltas, Grasim, and Mannapuram Finance have all released their earnings reports. Tata Motors reported a consolidated profit of ₹3,924 crores, while SBI, GRSE, Naukri, Grasim, and Mannapuram Finance saw their profits rise. However, Voltas reported a decline in its Q1 profit.
In a separate development, the Indian Cabinet has approved a subsidy of ₹30,000 crores to compensate oil firms for LPG losses. The subsidy is aimed at providing relief to consumers amidst rising fuel prices.
Lastly, SEBI has eased the framework for private Infrastructure Investment Trusts (InvITs) going public. The announcement was made in a circular issued by SEBI on Friday, marking a significant step towards encouraging investments in the infrastructure sector.
[1] SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/115 [3] Public Consultation Paper on Distributor Compensation in Mutual Funds, May 2023 [5] Industry Consultation Paper on Distributor Compensation in Mutual Funds, June 2025
- The Securities and Exchange Board of India (SEBI) has abolished transaction charges for mutual fund distributors, a decision that follows extensive industry and public consultations as detailed in SEBI Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/115.
- The decision to eliminate transaction charges is part of an effort to streamline the distributor compensation framework and ensure transparency, according to SEBI.
- Asset Management Companies (AMCs) will now directly remunerate distributors, instead of charging investors.
- Several businesses have reported their Q1 profits recently, with Tata Motors, SBI, GRSE, Naukri, Voltas, Grasim, and Mannapuram Finance among those releasing earnings reports.
- The Indian Cabinet has approved a subsidy of ₹30,000 crores to compensate oil firms for LPG losses, with the aim of providing relief to consumers amidst rising fuel prices.
- In a separate announcement, SEBI has eased the framework for private Infrastructure Investment Trusts (InvITs) going public, marking a significant step towards encouraging investments in the infrastructure sector.
- The finance and business sectors, including banking and insurance, may experience changes as a result of these regulatory developments.
