SEBI overhauls mutual fund norms, cuts expense ratio limits, Pg13

Key Highlights:

• SEBI revised expense ratio limits for mutual funds, now termed Base Expense Ratio (BER), excluding statutory levies.
• Base Expense Ratio (BER) limits for open-ended schemes reduced by up to 15 basis points across various Asset Under Management (AUM) slabs.
• Brokerage fees for mutual funds on cash market transactions cut to 6 bps from 12 bps, and derivative transactions to 2 bps from 5 bps.
• SEBI amended ICDR regulations to streamline requirements for public issues and ensure compliance with lock-in periods for pledged shares.

Detailed Insights:

• The revised Total Expense Ratio (TER) will include Base Expense Ratio (BER), brokerage, regulatory levies, and statutory levies like Securities Transaction Tax (STT), Goods and Services Tax (GST), and SEBI fees.
• For index funds and Exchange Traded Funds (ETFs), the Base Expense Ratio (BER) limit is revised to 0.9% from 1%, while for close-ended equity schemes, it is now 1% against 1.25%.
• SEBI removed the additional 5 bps expense allowance previously permitted for schemes with exit loads, aiming to enhance investor protection and transparency.
• Amendments to ICDR regulations allow depositories to mark securities as "non-transferable" if lock-in cannot be created, ensuring compliance even when shares are pledged.

Key Concepts Involved:

• Base Expense Ratio (BER): The limit on expenses that mutual funds can charge, excluding statutory levies.
• Asset Under Management (AUM): The total market value of the investments that a financial institution manages on behalf of its clients.
• Securities Transaction Tax (STT): A tax levied on the purchase and sale of securities listed on stock exchanges.