SEBI extends the deadline for public comments on the proposal regarding costs incurred by MF investors
The deadline for submitting public comments on the massive adjustments to the cost ratio for mutual funds that are being proposed was extended by the capital markets regulator Sebi on Thursday to June 8.
The plan aims to stop distributor practises that promote new fund offers for larger fees and require needless scheme change.
On May 18, Sebi published a consultation document asking for feedback by June 1 on the proposal to evaluate the total expense ratio (TER) imposed by AMCS to unitholders of fund schemes.
The deadline for comments to be submitted has now been extended until June 8, according to the regulator.
Asset management firms (AMCs) incur fees and expenditures, which are accounted for by TER.
In its consultation document, the Securities and Exchange Board of India (Sebi) suggested adding performance fees for funds. In this respect, it offered two strategies, but it also advised testing the models using the Regulatory Sandbox.
The regulator also recommended that TER be assessed at the AMC level rather than the scheme level as it is now. Additionally, equity-based and non-equity-based assets under management (AUM) should be divided into separate slabs.
According to the proposed framework, Sebi suggested that the maximum TER that might be levied for an equity programme at the AMC level be 2.55 percent. This cap ought to apply to AMCs with AUMs up to Rs 2,500 crore, or the first AUM slab.
Additionally, Sebi wants to include all extra expenditure heads in the TER as a whole. It implies that the TER itself should be a subset of all transaction fees. Brokerage and transaction fees, together with the Securities Transaction Tax (STT), have been suggested as part of this cap.
The regulator has also advocated for allowing AMCs to have a restricted membership in the stock exchanges so they may execute transactions for their own mutual fund schemes.
Greater transparency in the 42-player mutual fund sector and the accrual of advantages from economies of scale to investors would be made possible by the proposal addressing fees and expenditures levied by AMCs to unitholders of mutual fund schemes.
