The Nashik Investors' Association has opposed the recommendation of S A Dave-headed mutual fund advisory committee that investors pay the commission directly to distributors.

The S A Dave-headed mutual fund advisory committee has recommended to the Securities and Exchange Board of India that mutual fund investors pay the commission to distributors directly.

Accordingly, mutual fund investors will have to give separate cheques to distributors as commission if Sebi approves this recommendation.

Currently, the commission is deducted from the total investments in mutual funds.

Speaking to Business Standard, Pramod Puranik, Executive President, Nashik Investors Association, said, "The recommendation made by the Dave-headed advisory committee that the commission be paid by investors directly to distributors is totally wrong and unnecessary.

Moreover, the committee has not considered the different clauses such as service tax, income tax and Consumer Protection Act, while recommending it.

This move will not only affect common investors, but fuel the tax evasion and kill the long-term interests of Individual Financial Advisors."

"Insurance agents are given commission from insurance companies, while agents of PPF, NSC and Kisan Vikas Patra are paid commission by the government.

"Mediclaim and vehicle insurance agents are paid commission by the general insurance firms.

Likewise, mutual fund distributors are also at present given commission by the MF companies. Then why this new practice should be with Mutual Fund," he asked.

"MF distributors pay 14 per cent service tax, which is deducted directly by the AMCs (Assets Management Companies). The government's income (through Service Tax) can be affected to some extent if distributors accept the commission from investors in cash, instead of cheques," he said.