SEBI Revamps Mutual Fund Regulations for Enhanced Transparency

The Securities and Exchange Board of India (SEBI) has approved a comprehensive overhaul of mutual fund regulations. Key changes include amendments to the expense ratio framework and brokerage charges to enhance transparency. The updates aim to rationalize costs, simplify compliance, and eliminate redundancies in the regulations.

The Securities and Exchange Board of India (SEBI) announced a sweeping overhaul of mutual fund regulations on Wednesday, aimed at boosting transparency and reducing redundancies. Key changes include updates to the expense ratio framework and limitations on brokerage charges, which are designed to streamline compliance for asset management companies.

In its recent board meeting, SEBI approved excluding statutory levies such as Securities Transaction Tax and Goods and Services Tax from the expense ratio limits. This change ensures that any future adjustments to these levies will directly affect investors, promoting fairness. Additionally, SEBI has decided to remove a previously allowed 5 basis points additional expense charged across mutual fund schemes.

SEBI's revisions extend to simplifying eligibility norms for fund sponsors and digitizing investor communications. By eliminating outdated provisions and unnecessary chapters, the regulator has effectively reduced the regulation size by 44%, making it more manageable and focused on critical areas. The mutual fund industry, currently managing over Rs 80 lakh crore in assets, stands to benefit from these changes through improved operational efficiency and investor relations.

(With inputs from agencies.)