Fin product distribution commissions to be capped at 5%: Sebi

Noting that the 'push factor' of paying high commission to sales force is a driving force for proliferation of illegal deposit schemes, market regulator Sebi today said such payouts for sale of all fund-raising will be capped at 5 percent to prevent mis-selling soon.

"The 'push factor' was brought to the notice of the Standing Committee of Parliament which has recently submitted a report on change in legislation and one of the things which they have accepted is the existence of this push factor," Sebi whole-time member S Raman said.

"Now, very soon, if the legislation is passed, and when it is passed, commission of anything more than 3-5 percent for any type of fund raising in this country will be illegal." Stating that in the last three years since it was empowered with changes in the statutes, Sebi has passed 325 orders against such unscrupulous schemes, Raman said Sebi has found that greed of higher returns is not the biggest driving factors as interest offered is only 10-12 percent.

He said it was found that at times, agents were paid up to 35 percent of the amount as commissions which resulted in such products getting pushed.