Mumbai, Aug. 9 -- The Securities and Exchange Board of India (SEBI) has prohibited mutual funds from paying transaction charges to distributors for bringing in minimum subscriptions of Rs.10,000 - a practice previously allowed under mutual fund regulations.

In a circular issued on Friday, the capital markets regulator said distributors should not receive such charges since they are already entitled to remuneration from asset management companies (AMCs).

Paragraph 10.4.1.b of the Master Circular says, "The scheme application forms shall carry a suitable disclosure to the effect that the upfront commission to distributors will be paid by the investor directly to the distributor, based on his assessment of various factors including the ser...