SEBI extends deadline for feedback on proposal of mutual fund rules overhaul

The markets regulator SEBI on Wednesday, November 19, extended the deadline by a week to November 24 for submitting public comments on a proposal to overhaul mutual fund regulations, introducing a better definition of Total Expense Ratio (TER) and revising limits on brokerage charges.

The public comments on the consultation paper were required to be submitted by November 17.

"Based on the representations received by Sebi, it has been decided to extend the time to submit the public comments on the consultation paper till November 24," the regulator said in a statement.

On October 28, the regulator came out with a consultation paper suggesting an overhaul of mutual fund regulations, introducing a clearer definition of Total Expense Ratio, and revising limits on brokerage charges. The proposals are aimed at bringing regulatory clarity, reducing redundancies, and promoting ease of compliance.

Under the proposed framework, the Securities and Exchange Board of India (SEBI) plans to eliminate the additional 5 basis points (bps) that asset management companies (AMCs) were previously allowed to charge across mutual fund schemes.

This additional expense, introduced to offset the impact of crediting exit loads back to schemes, was first set at 20 bps in 2012 and later reduced to 5 bps in 2018. The additional expense of 5 bps that mutual fund schemes were allowed to charge was transitory in nature, Sebi noted.

Accordingly, with the objective of rationalizing costs for unitholders, this expense has been proposed to be removed.

To facilitate greater clarity and transparency, SEBI also proposed to exclude all statutory levies -- STT (Securities Transaction Tax), GST (Goods and Services Tax), CTT (Commodity Transaction Tax), and Stamp duty-- from the expense ratio limits, along with the present permissible expenses for brokerage, exchange, and regulatory fees.

Presently, GST on management fees is permitted over and above the TER limit. However, all other statutory charges are part of the overall TER limit specified for mutual fund schemes.