SEBI Commission Disclosure Norms

Transparency in commission is one of the most important regulatory developments in the Indian mutual fund industry. In the early days, investors had no idea how much the distributor earned from their investment. This opacity sometimes led to mis-selling — distributors recommending high-commission schemes rather than suitable schemes. SEBI changed this fundamentally. The half-yearly CAS (Consolidated Account Statement) that every mutual fund investor receives now includes a section showing the total commission and expenses charged to the account. This means clients can see exactly how much their distributor earned from their investments. SEBI mandates half-yearly disclosure of commission to investors as a mandatory norm. When these norms were first introduced, many distributors were apprehensive. However, the outcome was clear — distributors who provided genuine value saw their business grow because transparency built trust. Those who were merely pushing high-commission products lost clients, and rightly so. AMCs are required to display on their websites the scheme-wise commission structure — both trail and transaction charges — for each plan. This information is publicly available and any investor can check it. The ban on rebating is particularly important: distributors cannot share commission with investors to attract them. For example, telling a client, "Invest through me and I will give you back 0.5% of the commission" is a regulatory violation that can lead to ARN suspension or cancellation. There is also a key distinction: Direct plans and Regular plans must clearly show the difference in TER (typically a 0.5-1.0% expense ratio gap), making it obvious that the TER differential represents the distributor's compensation. This is fair and transparent — the client knows what they are paying for the distribution service and can choose accordingly.