Sebi announces major reforms in IPO, mutual fund rules

It has also recommended to the government tax benefits to equity MF investors under the proposed Rajiv Gandhi Equity Savings Scheme (RGESS), Sebi Chairman U K Sinha said.

Talking to reporters after a board meeting, Sinha said the board discussed and approved some "very far-reaching reforms" which include steps for expanding the reach of IPOs and MFs across the country.

In a major decision that could make it expensive for investors to put money in mutual funds, Sebi decided that any service tax would be charged to ultimate investor, not to the asset management company (AMC) as is the practice at present.

Besides, the AMCs would be allowed to charge additional expense ratio (the charge levied by fund houses towards fund management fees and other expenses) for catering beyond a threshold limit in the smaller cities.

The various decisions also include allowing mutual funds flexibility in using fund expense charges and said a committee is being set up to frame a national mutual fund policy.

Sebi decided that a minimum lot of shares would be assured to retail investors in IPOs. It also approved e-IPO procedure for electronic bidding in public offers to help investors across the country bid for shares in a cost-effective manner.

The regulator would also frame new rules for investment advisers, Sinha said.

Among other decisions, non-retail investors cannot withdraw or reduce their price or offer size in IPOs, but can enhance the same, as is the rule for retail investors.

For companies coming out with IPOs, they would now have to disclose the price band at least five working days before the opening of the bidding, as against the current norm for two days. MORE