BSE brokers seek clarity from SEBI over commission paid by mutual funds

BSE Brokers Forum has sought clarity from the market watchdog SEBI on the commission paid by mutual fund houses to brokers.
 
Forum said that the commission of 12 basis points is exclusive of statutory charges. The inclusion of service tax in the 12 basis point brokerage is killing the industry as the margins are wafer thin and from June 1, the rise of 50 basis points in service tax will further dent the margins, said Siddharth Shah, President of the BSE Brokers Forum in the letter.
 
They asked, “There has been lot of confusion regarding the interpretation of the 12 basis points ceiling. The fund houses are interpreting that the ceiling is along with all the statutory charges that is service tax and other applicable taxes.”
 
SEBI announced on September 26, 2012, that the commission paid by mutual funds to their brokers should not surpass 12 basis points. In the said SEBI notification, brokerage and transaction cost were capped to 0.12%, in case of cash market transactions, and 0.05% in case of derivative transactions.
 
SEBI notification ought to have clearly mentioned the cap excluding statutory levies, so that inadvertent interpretation would not have lead the MF clients to demand an inclusive rate of commission, where broker ends up paying service tax on his brokerage and service tax on exchange transaction cost, said Alok Churiwala, vice-chairman of the Forum.