Mumbai, Sept. 26: The Securities and Exchange Board of India (Sebi) today notified key changes in mutual fund regulations that were announced last month.
The market regulator has stipulated that expenses incurred by fund houses to drive sales in small cities will be credited back to the scheme if the inflows are redeemed within a period of one year.
It also said that fund houses should not pay a brokerage more than 12 basis points while buying and selling securities in the cash market and that mutual funds can increase the expense ratio by 30 basis points only if 30 per cent of the new inflows come from small cities or the inflows account for 15 per cent of the average assets under management (year to date) of the scheme.
At its board meeting on August 16, Sebi had allowed fund houses to charge an additional total expense ratio of 30 basis points if inflows come from beyond the top 15 cities. It then also allowed fungibility wherein the internal sub-limits such as the fund management charge within the overall expense ratio were scrapped.
These key changes were undertaken by the market regulator to increase the penetration of mutual funds in small towns and cities.
At present, a large part of the industry’s assets under management comes from leading cities. For instance, over 40 per cent of the funds raised by mutual funds come from Mumbai.