The new direct sales no-load criteria for Mutual Funds in India came into effect on January 4, 2008. Under this investors are not charged an entry load if they purchase directly from the AMC. The operative word is “direct”.
I have seen a lot of discussion on this issue on our internal mailing lists at work and elsewhere on the web. A lot of people seem to be confused about what “direct” means. The word was taken to mean “online” by a large section of people. The experts quickly pointed out that there is a distinction between purchasing mutual fund units on the web site of the AMC vs. buying the same units from a brokerage house like ICICIDirect.
Anyway, I recently logged into the ICICIDirect web site to purchase units in a short term floating rate fund from Chola and I noticed that they have posted a new message on the Mutual Fund Purchase page (see screen shot below).
Notice the paragraph highlighted in blue? It clearly states that they are brokers and hence are entitled to their pound of flesh.
I noticed this on Jan 15, 2008, a good 10 days after the new rules came into force and am not sure when they posted this message. On Jan 4? Or later after their customer support was flooded by mistaken but nevertheless angry customers complaining about the entry loads charged on their purchases?
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