New Delhi: Concerned over large-scale outflow from mutual fund schemes , market regulator SEBI wants fund houses to invest part of their profit on cementing ties with investors and curtail commissions and freebies to agents. Market watchdog SEBI, which also oversees mutual funds, is of the view that fund houses can improve their commission bargaining power by working on consolidation in the distribution network and bringing down the number of agents and distributors. In its last meeting, the SEBI board discussed the impact on mutual fund industry from regulatory steps such as abolition of entry load taken in the past one year and was of the view that there has been a positive impact on the profits from the actions taken by the regulator, an official said. "A part of the additional profits earned in FY'10 could be invested in 'investor connect' to cement relationship with investors and for training the distributors to adapt to the new environment," K N Vaidyanathan, SEBI's Executive Director responsible for the mutual fund segment, told the board. The board was also informed that some fund houses have initiated steps in this direction and this (spending on investors) needs to be encouraged, the official added. SEBI has been reacting strongly to large commissions and freebies offered to MF distributors, although some industry players contend that agents need to be entertained to contain the outflows and improve inflows from the investors. The abolition of entry loads, the additional payments charged to new investors that mostly go to distributors, has led to fund houses cutting down on agent commissions. "The AMCs have done well to adapt to the new environment and are having a more even relationship with distributors, though concentration of distributors needs to be addressed to improve bargaining power for commission negotiation," the official said. While some industry players have cried foul against the move saying their business has been hurt, SEBI is of the view that "abolition of entry load has not made any significant dent in inflows into existing schemes." However, coupled with more rigorous requirement for new scheme, it has resulted in drastic reduction in NFOs. AMCs continue to be challenged by outflows and need to analyze factors influencing outflows." The board observed that the abolition of entry load has led to fewer number of NFOs (new fund offers) and it would help the industry by way of consolidation of products. SEBI abolished entry loads with effect from August 2009 and says that there have been savings worth Rs 1,260 crore for retail investors in the one-year period since then. Besides, there has been a near 4-fold increase in profit in FY'10 over the previous fiscal and more fund houses made profits during the year.