The market regulator aims to lower brokerage costs, make fee disclosures clearer, and simplify how investors are charged.In a new consultation paper reviewing the 1996 Mutual Fund Regulations, SEBI has suggested tightening the cost structures for Asset Management Companies (AMCs) so that more benefits reach investors directly.
One of the biggest proposals is a sharp cut in brokerage and transaction costs that mutual funds can link to their schemes.
SEBI has suggested capping brokerage for cash market trades at just 2 basis points (bps), down from the current 12 bps. For derivatives, the cap will be reduced from 5 bps to only 1 bps.
Another major move is the removal of the additional 5 bps expense that AMCs have been allowed to charge on their total assets under management (AUM) since 2018.
To balance this change, SEBI has proposed increasing the base Total Expense Ratio (TER) slabs for open-ended active schemes by 5 bps.
To make expense disclosures more transparent, SEBI has suggested that taxes and government charges like Securities Transaction Tax (STT), Goods and Services Tax (GST), and stamp duty should not be included in the mutual fund expense ratio.