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SEBI has imposed a fine of Rs.1 lakh each on DSP Mutual Fund and its trustees for violating TER norms.
The market regulator found that the fund house charged lower expense ratio in one of its ETFs – DSP Nifty 50 ETF to make its product competitive. The TER of the scheme was lower than the actual cost incurred by the fund.
DSP Nifty 50 ETF was launched in December 2021 and incurred expenses of Rs. 94,182.47 or 0.16% of the total AUM as on March 31, 2022. Of this, DSP MF charged only 0.07% (Rs. 40,944.37) to the scheme and absorbed the balance of 0.09% (Rs. 53,238.10) from the AMC’s book.
In SEBI order, the fund house is quoted as justifiin its decision by saying, “The reason of excess expense borne by AMC is due to competitive market and increasing of TER would have restricted ability to increase scheme's AUM.” The trustee added, “The above practice will be only for short term till the time the scheme scales up the AUM to a size which will enable it to absorb the costs within the TER range charged by other similar schemes in the industry.”
The regulator observed that the AMC/Trustee has indicated to continue the practice which is not in line with the SEBI regulations.
