SEBI: Distributors should be able to make enough from mutual fund commissions
SEBI
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India’s market regulator, SEBI’s primary aim is to ensure fair trade practices in the mutual fund sector. The expenses of managing a fund (including a fee of mutual fund manager and commissions for a distributor in case of regular funds) must be meted out fairly.

An intermediary (broker, distributor, advisor etc.) must also be incentivised to enter the sector. SEBI has been steadily slashing down Expense Ratio (charged by mutual fund companies) to entice more investors into investing in mutual funds.

SEBI decides the distributors’ remuneration too. As the mutual fund is primarily meant for the masses, SEBI’s priority has always been to protect investors’ interest. This is why they regulate fee of the Asset Management Company as well as distributors. However, the market watchdog also has to ensure that those in the profession are well compensated to attract more people to join the industry.

Points SEBI is considering:
Mutual fund landscape in India is still in a nascent stage. Aside from a small percentage of aware investors who buy funds directly from fund houses, the industry is heavily dependent on distributors to spread the word and bring in new investors.
There is a stark contrast when you compare insurance commission (10% to 30% of the first premium) set by IRDAI to that of mutual fund commission. It is essential to study this gap and figure out a way to standardise without affecting the earning potential of distributors.

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