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MF News No changes in expense ratio slab: SEBI MF regulation

No changes in expense ratio slab: SEBI MF regulation

Existing expense ratios to continue.
Nishant Patnaik Jun 12, 2018

Mutual fund distributors have a reason to cheer. The talks around reduction in expenses chargeable to mutual fund schemes seems to have been put on backburner for now.

SEBI has amended mutual funds regulations in which it has not made changes to the expense ratio slab. That means, fund houses can continue to charge up to 2.50% on equity funds and 2.25% on debt funds.

A reduction in expense ratios could have led to a cut in trail commissions that distributors earn on their assets under advisory.

Expense ratio slab

AUM

Equity TER

Debt TER

Up to Rs.100 crore

2.50%

2.25%

Next Rs.300 crore i.e. up to Rs.400 crore

2.25%

2%

Next Rs.300 crore or up to Rs.700 crore

2%

1.75%

Above Rs.700 crore

1.75%

1.50%

 

Source: SEBI

However, SEBI has incorporated changes to the additional expenses that fund houses charge for B30 expansion and exit loads. While the regulator has revised the definition of top cities and beyond top cities for additional TER, it has reduced expenses charged in lieu of exit to 0.05%.

Apart from these additional charges, fund houses can also charge up to 0.12% for cash market transaction and 0.05% for derivative transaction as brokerage and transaction cost for execution of trade.

If we put together all the expenses, fund houses can charge 0.52% (0.30% for B30 expansion, 0.05% in lieu of exit loads and 0.17 for executing trades) additionally. This shows that fund houses can charge up to 3.02% and 2.77% in equity funds and debt funds, respectively.

 

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7 Comments
Prashant · 2 months ago
But our brokerage has already reduced from April 2018. AMCs have already passed on the 0.15% reduction on us. They have reduced the ditect expense ratio and recovered it from regular plans so basically we the distributors are paying for their loss of direct plans.

Shame shame shame
Girish · 2 months ago
Sir, this article is little misleading.

This TER on cash and derivatives trades was there earlier also. It was introduced along with 0.2% addl TER (in lieu of exit load) in question now. In the recent amendment it is left untouched. It has nothing to do with the reduction in Addl. TER. Yes, AMC's will save money there in the trades expense, if their trade costs (brokerage payout) are lesser. And definitely, they are lesser than 0.12% as MF is a bulk / high volume trader.
Dilip · 2 months ago
Fund houses have reduced further trail from 01-06-2018even on old AUM.SEBI is favoring AMCs. AMCs should reduce their marketing expenses in regular plan instead they are charging direct plan expenses from Regular Plan
pinaki · 2 months ago
Against which circular no SEBI has declaired this? Representative of Fund houses are denying it.
Sourav Chatterjee · 1 month ago
According to Gazette Notification No.SEBI/LAD-NRO/GN/2018/14 dated May 30, 2018, the additional expense under Regulation 52 (6A) (c ) is reduced from 20 bps to 5 bps. i.e. a reduction of 15 bps. Consequently , the trail brokerage on the existing as well as the future assets shall be reduced accordingly. Please clarify.
Sandeep Nirvan · 1 month ago
Brokerage might increase from next month and there will be one month brokerage report.
Sandeep Nirvan · 1 month ago
Brokerage might increase from next month and there will be one month brokerage report.
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