FAQs : Impact of SEBI regulations and Fee Structure on Mutual Funds
1

What is the new SEBI regulation all about?

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.

 
2

Do I have to pay any Entry Load for mutual fund purchases made after August 01, 2009 ?

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.

 
3

How does the new fee structure apply to my unit holdings of Rs. 8 lakhs or more?

If the cumulative MF investment you have with us is Rs. 8 lakhs or more, you actually pay NOTHING.

Mutual Funds - Fee Structure Rs. per transaction
For SIPs Nil
For Lumpsum investments Nil

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 investments which have not been done through us, you can transfer them to ICICIdirect without any extra charge, so that you can enjoy these benefits on the cumulative unit holdings. (Click here to know more about the TransferIn process)

To illustrate this with the help of some examples:

On Investing... Entry Load Transaction Fee Net Savings
  Old Structure (Rs.) New Structure (Rs.) New Structure (Rs.)
Rs. 75,000/- as a monthly SIP for 12 months 20,250/- Nil 20,250/-
Rs. 8,00,000/- as a lumpsum in Mutual Fund 18,000/- Nil 18,000/-
Old structure charges have been calculated @2.25% Entry Load as an illustration

 
4

How does the new fee structure apply to my unit holdings of less than Rs. 8 lakhs?

If the cumulative MF investment you have with us is less than Rs. 8 lakhs, you only pay nominal charges on each transaction.

Mutual Funds - Fee Structure Rs. per transaction
For SIPs 30/- or 1.5% whichever is lower
For Lumpsum investments 100/-


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.

To illustrate this better:
On Investing... Entry Load Transaction Fee Net Savings
  Old Structure (Rs.) New Structure (Rs.) New Structure(%)
Rs. 500/- as a monthly SIP for 12 months 135/- 90/- 33%
Rs. 1,000/- as a monthly SIP for 12 months Mutual Fund 270/- 180/- 33%
Old structure charges have been calculated @2.25% Entry Load as an illustration; Service Tax will be levied as applicable.
Transaction Fees have been calculated @1.5% for SIP as they are lower than Rs. 30 in these cases.


On Investing... Entry Load Transaction Fee Net Savings
  Old Structure (Rs.) New Structure (Rs.) New Structure(%)
Rs. 10,000/- as a monthly SIP for 12 months 2,700/- 360/- 2,340/-
Rs. 1,00,000/- as a lumpsum in Mutual Fund 2,250/- 100/- 2,150/-
Old structure charges have been calculated @2.25% Entry Load as an illustration; Service Tax will be levied as applicable.
Transaction Fees have been calculated @ Rs.30/- for SIP as that is lower than 1.5% in this case.

 
5

Is GST included in the ICICIdirect Service Charges?

No. GST will be levied additionally on the ICICIdirect Services Charges, as applicable.

 
6

How is the "cumulative value" of my MF portfolio calculated for Transaction Fees?

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's 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.

 
7

Is the "cumulative value" calculated on my Equity-based holdings only?

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.

 
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?

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.

 
9.

What if I have more than Rs. 8 lakhs in my Demat balance?

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.
 
10.

Will the charges be applicable to all categories of schemes or only for Equity-based schemes?

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.
 
11.

If I invest in liquid funds which do not have entry/exit loads, will I still be charged any transaction fees?

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.
 
12.

Do Transaction Fees apply to redemptions as well?

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.
 
13.

How can I benefit more from the new fee structure?

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.

1.If your mutual fund holdings of over Rs. 8 Lacs with ICICIdirect.com, you will 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.

2.If you typically invest in SIPs of smaller amounts (say, less than Rs. 2,000) 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.

3.Similarly, if you invest in lumpsum of smaller amounts (say, less than 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.
 
14.

What happens to my existing SIPs?

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.
 
15.

My SIP value is typically Rs. 1000 or less. How can I benefit from the new fee structure?

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.
 
16.

Do I need to take any action to avail of the new fee structure through ICICIdirect.com?

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.
 
17.

How do I transfer my MF holdings from other distributors to ICICIdirect.com?

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 TransferIn 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.)
 
18.

What is the impact of the new regulations on Exit Loads?

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.
 
19.

In light of the new SEBI guidelines, what would be my effective purchase price?

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. 10110.30/1000 units). It is the price which you actually pay to purchase a single unit of a Mutual Fund Scheme.
 
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?

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.
 
21.

Will I be charged Transaction Charges on investments made after August 01, 2009, in NFOs launched prior to August 01, 09?

Yes. Although upfront Transaction Charges and Goods &Services Tax(GST) would be charged to you on placing a purchase order in NFO launched prior to August 1, 2009, such charges will be refunded subsequently.
 
22.

Why does ICICIdirect.com charge Transaction Fees when Entry Load is 0%?

ICICIdirect.com offers you an industry-leading full-service transaction platform available 24x7 using which you can 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 (store locator), 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 advantage of Cost, Convenience and Commitment at all times.
 
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