And this applies to investments too. However, as investment avenues over the years have been restricted to instruments such as bank deposits, where no upfront fees are levied, there is no conscious awareness of the costs incurred. This week we take a look at the fees charged by funds under different heads and how these are regulated.
Initial issue expenses AT the start itself, when a scheme is floated there are certain costs.
These are initial issue expenses and pertains to the costs incurred in collecting the initial corpus. These expenses usually consist of advertising and marketing expenses, brokerage or selling commissions, legal and application fees and printing and mailing expenses. The Sebi Mutual Fund Regulations 1996, which forms the regulatory framework of the mutual fund industry in India, stipulates that these cannot exceed six per cent of the amount raised. This implies that the maximum a fund can deduct from the amount raised is six per cent. Thus, for a Rs 10,000 investment at least Rs 9400 has to be invested by law.