Market regulator Sebi proposes new expense slabs for mutual funds

Transaction and brokerage costs to come under TER

The Securities Exchange Board of India (Sebi) has proposed to make the total expense ratio (TER) charged by mutual funds (MFs), inclusive of the Goods and Services Tax (GST) charged on management fee and has shared revised expense slabs for MFs to account for the tax outgo.

According to the proposal, the TERs being changed by MFs will be linked to the total assets being managed by MFs in each asset class rather than the present model, where the TERs are linked to total assets in the scheme. For example, an MF managing equity assets of less than Rs 2,500 crore across schemes will be able to charge a maximum expense of 2.55 per cent in equity schemes, if the present proposal goes through.

Further, the regulator has also proposed to bring transaction costs and brokerages within the TER.

"It is proposed that brokerage and transaction expenses may be included within the TER limit and the transaction wise limits prescribed for additional expenses towards brokerage may not be applicable. This  may  bring  in  much  needed  transparency  in  the  costs  charged  to unitholders, and greater accountability in respect of the significant brokerage costs, with oversight from the AMC (asset management company) Board/Trustees," the regulator stated.