Context:
Sebi has announced a new rule that would restrict unnecessary portfolio churn by distributors in the launch of new fund offers, or NFOs.
Key Highlights:
- The new rule would ensure that commissions for distributors who switch investors from one fund to another are lower than the two schemes.
- The rule seeks to reduce mis-selling by ensuring that distributor incentives are in line with investor interests while promoting long-term stability in investment portfolios.
- Mis-selling is the main driver of mis-selling, with asset management companies rewarding distributors with higher commissions on NFOs.
A New Fund Offering (NFO)
A New Fund Offering (NFO) is when an asset management company (AMC) launches a new mutual fund scheme and invites investors to subscribe to units of the
