Sebi Changes to Mutual Fund Rules

The Securities and Exchange Board of India (Sebi) recently updated the rules for how mutual funds operate. They’ve made some big changes to how costs are handled and reorganized older rules. This is all about making things clearer and fairer for investors.

Key Points

• Sebi is simplifying mutual fund rules for better clarity.
• Investors will see clearer costs, with changes to expense limits.
• Expense ratio limits (BER) are now separate from taxes.
• Total Expense Ratio (TER) includes BER, brokerage, and taxes.
• Expense limits have been lowered for many fund categories.
• Regulations have been modernized for easier understanding and compliance.

One of the biggest changes is how much mutual funds charge. Before, a limit called the “expense ratio” was set to control these costs. Now, this limit is called the “base expense ratio” (BER). Sebi wants to make sure investors understand exactly what they’re paying.

Here’s the important part: the BER doesn’t include taxes like Sales Tax (GST) or Securities Transaction Tax (STT). Instead, these taxes will be charged separately. This means investors will see a more accurate picture of all the costs involved.

For example, if you invest in an index fund, the BER might be 0.90% (that’s 0.90 cents for every dollar invested). But you’ll still have to pay STT and GST on top of that. The ranges for expense limits have been lowered for many different types of funds.

Sebi also changed the rules about how much brokers can charge. The amount they can charge has been reduced, making things cheaper for investors. Finally, they’ve completely updated the older rules from 1996, making them easier to understand and use.

Clearer rules mean better understanding and control over your investments.