DelhiDesk India’s Securities and Exchange Board (SEBI) has proposed a uniform total expense ratio (TER) across mutual fund schemes, a move aimed at bringing transparency and fairness to the industry. The TER is a percentage of a scheme’s corpus that a mutual fund house charges towards expenses including administrative and management. The proposal would reduce complexity and make cost comparisons across funds much easier, said Sonam Srivastava, founder and CEO of Wright Research. The proposal could put pressure on fund houses in the short term but is expected to enhance investor confidence and stimulate long-term growth in the sector. The consultation paper will form the basis of final guidelines after seeking comments from stakeholders by 1 June.
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👉 Securities and Exchange Board of India (Sebi) has proposed a uniform total expense ratio (TER) across mutual fund (MF) schemes to bring transparency to costs charged to unitholders.
👉 The uniform TER will reduce complexity and make cost comparisons across funds easier, enhancing investor confidence and stimulating long-term growth in the sector.
👉 Experts express optimism and caution over Sebi’s new laws, with potential impact on asset management firms’ margins, but a tolerable adjustment due to the industry’s strong volumes.
👉 Presently, Sebi allows asset management companies to charge unitholders of mutual funds four additional types of expenses over and above the specified TER limits.
👉 TER is a percentage of a scheme’s corpus that a mutual funds House charges towards expenses including administrative and management.
👉 Sebi’s new proposal for MF investors includes including brokerage and transaction expenses within the TER limit, uniformity in charging expenses, and an option to exit at the prevailing net asset value without any exit load when there is an increase in TER.
👉 Sebi has proposed an additional incentive for distributors for new investments from women investors.
👉 Sebi’s consultation paper will form the basis of final guidelines after seeking comments from stakeholders by June 1.
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