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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Net Asset Value, Total Expense Ratio and Pricing of Units

Under SEBI rules, what is the correct treatment of the purchase price for a unit in an open-ended scheme that has no entry load?

Units are purchased at the applicable NAV because SEBI does not permit entry loads. Investors cannot be charged an upfront load, and distributor remuneration is paid through the scheme's expenses or by the AMC, not added to the purchase price.

  1. AApplicable NAV plus a distributor commission charged to the investor
  2. BApplicable NAV, since entry load cannot be charged to investorsCorrect
  3. CApplicable NAV less exit load
  4. DRepurchase price plus the scheme's expense ratio

Explanation

SEBI banned entry loads for mutual fund schemes in 2009. Units are therefore purchased at the applicable NAV. Any distributor commission is paid by the AMC from its own resources or via the scheme's expenses, not charged separately to the investor at entry.

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