New MF rules from April 1: Sebi allows performance-linked expense charging
The revised regulations, approved at Sebi's December board meeting, will come into effect from April 1, 2026
 "New MF rules from April 1: Sebi allows performance-linked expense charging")
The Securities and Exchange Board of India (Sebi) on Friday notified the revamped Mutual Fund Regulations, marking a comprehensive overhaul of the three-decade-old framework.
The changes introduce a revised structure for expenses, sharper disclosure requirements and strengthened governance norms for fund houses.
A key feature of the new regulations is the provision allowing mutual fund schemes to charge a base expense ratio linked to performance, subject to conditions laid down by the regulator.
“Mutual fund schemes that offer to charge base expense ratio based on the performance of the scheme shall comply with the expense ratio structure and disclosures thereto as specified by the Board from time to time,” Sebi said in the notification.
The revised regulations, approved at Sebi’s December board meeting, will come into effect from April 1, 2026.
The framework also expands the responsibilities of trustees and key managerial personnel, tightening oversight and reinforcing governance standards across asset management companies (AMCs).
In a significant structural change, the regulations introduce the concept of a base expense ratio (BER), which will represent only the fee charged by an AMC for managing investors’ money.
Other levies, such as brokerage, securities transaction tax, stamp duty and exchange fees, will now have to be disclosed separately. Earlier, these costs were aggregated under the total expense ratio (TER).
“Large size funds will get impacted but this is another welcome step by the market regulator to enhance transparency,” said Navneet Munot, managing director and chief executive officer of HDFC Asset Management Company.
Sebi has also rationalised brokerage caps across segments. In the cash market, the brokerage ceiling has been reduced to 6 basis points (bps) from an effective 8.59 bps earlier, while in the derivatives segment, the net brokerage cap has been lowered to 2 bps from 3.89 bps.