Ease of investing: Sebi's interventions will bring greater transparency

The Securities and Exchange Board of India (Sebi) at its board meeting last week set easier guidelines for mutual-fund investment and companies aiming for an initial public offering (IPO). Compliance on raising listed debt has also been eased with a change of thresholds for high-value debt listed entities (HVDLE), where stricter norms will now kick in at an outstanding debt worth ₹5,000 crore, instead of ₹1,000 crore. Mutual-fund investing may become cheaper and more transparent as new Mutual Fund Regulations replace the Mutual Fund Regulations, 1996. One key change is the treatment of the expense ratio with a new concept, the base expense ratio (BER), replacing the earlier total expense ratio. Costs like securities transaction tax, goods and services tax, stamp duty, and exchange fees will not be included in the BER, which will consist only of core fees charged by the fund. 

Other pass-through costs, such as those mentioned above, will be mentioned separately. Hence, the cost structure becomes more transparent, with the ber, brokerage, regulatory levies, and statutory levies shown separately. Sebi has also lowered the limits on the (BER) across categories, which will reduce costs slightly for investors. The new stockbroker regulations, Sebi (Stock Brokers) Regulations, 2025, have been introduced, replacing the Stock Brokers Regulations, 1992. These are organised into 11 simplified chapters, with a focus on easing compliance. The new framework was introduced to meet the needs of digital trading. It establishes a formal definition of algorithmic trading, clearer norms for proprietary trading, and a regulatory framework for execution-only platforms, which facilitate direct transactions in mutual funds. Changes in the reporting system mean that the bourses will now act as first-line regulators for stockbrokers. New brokerage limits apply to brokerage fees, reducing them from 8.59 basis points (bps) to 6 bps in the spot market and from 3.89 bps to 2 bps in derivatives. 

Easier IPO guidelines — with amendments to the Issue of Capital and Disclosure Requirements norms — mean that shares held by non-promoter individuals will be locked in for six months before the IPO. The higher threshold for HVDLE will make life easier for issuances in the bond market. Credit-rating agencies will also be allowed to rate instruments that fall under the umbrella of other regulators, such as the Reserve Bank of India. This expands the scope of ratings for unlisted debt instruments. A clear distinction will be mandatory in rating reports and the marketing of products regulated by Sebi versus those under other regulators.

Share transfer and related processes have been made faster and simpler with much less paperwork for investors. For example, investors are no longer required to get hold of a separate confirmation letter from the company for a host of equity-related activities, and shares will be credited directly to the investor’s demat account once verification is done. Shares held physically will also be easier to transfer now under a one-time window. Investors will be able to transfer the shares to their own name in digital form using the window. This will be a limited-period opportunity and will only apply to shares purchased before April 1, 2019. Overall, these changes will bring greater transparency to the market, reduce friction for investors, and ease compliance for stakeholders.