Markets regulator Sebi on Wednesday cleared a sweeping revamp of mutual fund rules, introducing a revised expense ratio framework and capping brokerage charges to enhance transparency.
The regulator’s board also ratified a complete overhaul of stockbroker regulations, replacing the three-decade-old regime with a modern rulebook designed to simplify compliance and align supervisory standards with contemporary market practices.
At its board meeting, Sebi cleared a proposal to exclude all statutory levies — Securities Transaction Tax (STT), Goods and Services Tax (GST), Commodity Transaction Tax (CTT) and stamp duty — from mutual fund expense ratio limits.
These charges, along with brokerage, exchange and regulatory fees, will now sit outside the limits and the revised framework will be termed the base expense ratio, Sebi chairman Tuhin Kanta Pandey said. Currently, only GST on management fees is allowed over and above the total expense ratio (TER), while other statutory charges are included.
The regulator said excluding statutory levies would ensure that any future changes in such taxes are passed on directly to investors. Sebi also decided to remove the additional 5 basis points (bps) that asset management companies were allowed to charge across schemes for exit loads.
This extra charge, originally introduced in 2012 at 20 bps to offset the impact of crediting exit loads back to schemes and later reduced to 5 bps in 2018, was transitory in nature and has now been withdrawn to rationalise costs for unitholders.
To ensure expenses are charged fairly and only once, Sebi revised brokerage limits to 6 bps from 12 bps for cash market transactions and to 2 bps from 5 bps for derivatives. Other decisions include simplified eligibility norms for fund sponsors, easing of compliance burdens on asset management companies through fewer mandatory trustee meetings, elimination of newspaper advertisements for scheme changes in favour of online disclosures and removal of duplicative reporting.
Redundant chapters on real estate mutual funds and infrastructure debt funds were deleted, as separate frameworks already exist. Sebi said these changes reduced the mutual fund regulations by 44 per cent in pages and 54 per cent in word count. The industry, which began in 1963, now manages over ₹80 lakh crore in assets.
Separately, Sebi approved replacing the three-decade-old Sebi (Stock Brokers) Regulations, 1992 with the Sebi (Stock Brokers) Regulations, 2025. The new rules, structured into 11 chapters, simplify language, remove obsolete provisions and streamline reporting. Definitions have been amended, joint inspections permitted, electronic maintenance of books allowed, and criteria for identifying qualified stock brokers rationalised. Pages have been cut from 59 to 29.
The board also amended ICDR rules to ease IPO lock-in challenges, allowed incentives in public debt issues, streamlined LODR timelines and relaxed norms for credit rating agencies.
The board also acknowledged the report of the high-level committee on conflicts of interest, deferring detailed deliberations to a subsequent meeting.