Mutual Fund Rules: If you are a mutual fund investor, this news will directly impact you. Market regulator SEBI is considering amending the rules regarding brokerage fees in mutual fund schemes to provide investors with greater transparency, lower costs, and better returns. This proposal was put forward by SEBI in October. The proposal reduces the brokerage fee paid by mutual fund houses from 12 bps, or 0.12%, to 2 bps, or 0.02%.
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What is SEBI’s Objective?
This move by SEBI aims to reduce the cost of mutual fund schemes, increase investors’ net returns, and bring transparency to the fee structure.
Brokerages and fund houses have objected to this move. They say that such low fees will make it difficult to prepare research reports and analyses. This could impact the quality of stock selection. Ultimately, this could impact fund performance and investor returns.
SEBI’s proposal is being considered
Following the new regulations, SEBI is considering this proposal. Discussions are underway with the industry to balance the interests of both investors and fund managers. Ultimately, the new brokerage fee limit could be slightly higher than 2 bps, providing relief to both parties.
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What it means for investors
If fees are reduced to a reasonable level, fund costs will be lower, leading to better returns. However, if fees are reduced excessively, research may be significantly impaired, potentially impacting fund performance. Discussions between SEBI and the industry are expected to conclude by mid-November. Following this, the new regulations will be finalized. This could impact the expense ratios of mutual fund schemes in the coming months.