The regulator has introduced a host of measures for distributors, investors and AMCs that are expected to ‘re-energise’ the industry
The SEBI board today accepted a majority of the recommendations made by the SEBI Mutual Fund Advisory Committee.
Mutual Funds will be able to charge up to 30 basis points extra total expense ratio (TER) for getting any incremental inflows beyond the top 15 cities. These inflows should be a minimum 30% of the total inflows in a scheme. If these inflows are less than 30%, then the proportionate amount will be allowed to be charged as additional TER. Further, AMCs will have to report to trustees on the actual efforts put in terms of opening of new branches beyond top 15 cities.
To curb churning, SEBI has said the exit load should be credited to the scheme while the AMCs will be able to charge an additional TER to extent of 20 basis points with no additional cost to investors. AMCs will have to claw back this additional TER if the inflows are beyond top 15 cities and if investments are redeemed within one year. Many industry officials believe that the 30 basis points for inflows beyond top 15 cities and 20 basis points will be over and above the current TER permissible limits.
SEBI will make a recommendation to the government that Rajiv Gandhi Equity Savings Scheme (RGESS) to be routed through equity mutual fund schemes.
It said that a committee will be set up to form a mutual fund policy which look into various aspects like enhancing the reach and promoting financial inclusion, tax treatment, obligation of various stakeholders, etc. “Mutual Fund Advisory Committee of SEBI would recommend long-term policy measures after wider consultation with all the stakeholders in a reasonable time frame,” stated a release from SEBI.
The SEBI board has mooted to set up a Self-Regulatory Organisation which would regulate distributors.
The regulator has asked AMCs to make monthly portfolio disclosures on their website. AMCs will have to disclose their half-yearly financial results on their websites. Additionally, they’ll have to place an advertisement in at least one national and one regional newspaper.
AMCs will need to make additional disclosures like gross inflows, net inflows, average assets under management, ratio of AUM/ gross inflows distributor wise.
In order to promote direct investments, SEBI has asked AMCs to run a separate plan which charges a lower expense ratio.
The regulator has allowed AMCs to accept cash transactions up to Rs 20,000 for those who don’t have a PAN card, bank account, subject to compliance with the Prevention of Money Laundering Act, 2002 (PMLA) norms applicable in other products.
AMCs will have to set apart a portion of the asset management fees which they charge to the scheme annually for investor education campaigns. SEBI did not mention as to how much AMCs have to set aside for this initiative.
SEBI has also said that all categories of investors will be subjected to a uniform expense structure under a single plan. Currently AMCs charge higher for retail investors and less for institutional clients.
It has also decided to harmonize applicability of NAV across various schemes based on the day on which the funds are available for utilization, for an amount equal to or more than Rs. 2 lakhs.
SEBI has capped the brokerage and transaction cost charged to the scheme at 12 basis points for cash market transactions and 5 basis points future & options transactions.