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Sebi Tweaks MF and IPO Rules, Skips Conflict of Interest Changes
Mumbai: The Securities and Exchange Board of India (Sebi) has implemented significant changes in mutual fund (MF) regulations and initial public offering (IPO) processes, while postponing discussions on potential conflict of interest reforms affecting its senior officials. The adjustments, revealed during a Board meeting on Wednesday, focus on enhancing transparency in investor costs.
Key Changes to Mutual Fund Regulations
– Transparent Fee Structure: Sebi approved a new fee framework for asset management companies aimed at increasing cost clarity for investors. These measures follow a comprehensive review of MF regulations, marking the first significant overhaul in nearly 30 years.
– Total Expense Ratio (TER) Adjustments:
– The total expense ratio will now include a Base Expense Ratio (BER), which excludes statutory levies such as securities transaction tax (STT), goods and services tax (GST), and stamp duty.
– As part of this initiative, the cap on brokerage fees has been reduced:
– From 12 basis points (bps) to 6 bps for cash market transactions.
– For derivative transactions, from 5 bps to 2 bps.
– The additional 5 bps previously charged by fund houses has been eliminated.
– Cost Disclosure: Investment firms are now required to provide complete disclosure regarding all cost elements associated with their schemes.
IPO Disclosure Simplifications
– Standardized Prospectus: Sebi has introduced a concise, standardized prospectus at the draft offer stage, improving accessibility for retail investors.
– Eased Lock-In Regulations: The revised rules also simplify pre-IPO lock-in conditions, encouraging more participation from investors.
Background on Brokerage Challenges
Sebi Chairman Tuhin Kanta Pandey noted concerns regarding high brokerage charges linked to bundled services, including research. He highlighted that attempts to separate these costs were unsuccessful in Europe and the UK, leading to a contemplation of a different operational model for brokerage fees.
Conclusion
These regulatory changes are poised to foster a more transparent and efficient mutual fund landscape, accompanied by simplified processes for IPO disclosures. While the delay in addressing conflict of interest concerns may raise eyebrows, the primary focus remains on enhancing investor experience and cost transparency in the financial markets.
Stay informed about the evolving landscape of Sebi regulations and their implications for investors and financial institutions alike.