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SEBI will bring all expenses and taxes within TER. In a press meet held recently, Madhabi Puri Buch said that fund houses should consider all expenses and taxes within the TER limit.
Madhabi said, “When we say total expense ratio, it should be total without any ifs or buts.”
Simply put, SEBI wants fund houses to incorporate GST levied on fund management within the maximum permissible TER. The market regulator also wants fund houses to include brokerage cost in TER.
Currently, fund houses charge GST of 18% on the fund management component, which is over and above the maximum TER limit. In addition, fund houses pay brokerage to the security companies on MF transactions, which is over and above TER.
“If you are taking asset management fees to manage the assets, then why are you paying such large sums to the broker for the research that you were supposed to do. The other thing we found was the distinct possibility that the brokerage was being paid for reasons other than professional ones. This is not coming under anyone’s radar because the board of the AMCs are not looking at it. The minute you bring it under TER, automatically the board of the AMC will seek justification on such payments to brokers,” Madhabi said.
