SEBI board overhauls Mutual Fund regulations, approves Base Expense Ratio revamp

SEBI Board Meeting Today: The Securities and Exchange Board of India (SEBI) has approved the Mutual Fund Regulations, 2026, replacing the 1996 framework, in a move aimed at lowering costs, improving clarity, and boosting transparency for investors.

The SEBI board, in a meeting held on December 17, also considered a report by a high-level panel recommending mandatory public disclosure of assets by senior officials to prevent conflicts of interest. The board reviewed proposals to overhaul norms governing mutual funds and stock brokers, with a focus on simplifying regulations and reducing investor confusion.

Base Expense Ratio (BER) introduced

Add Zee Business as a Preferred Source

Under the new rules, the Expense Ratio will now be called the Base Expense Ratio (BER). Statutory charges such as Securities Transaction Tax (STT), Goods and Services Tax (GST), Stamp Duty, and SEBI/Exchange fees will not be included in the BER calculation. SEBI Chair Tuhin Kanta Pandey said, “An important objective of this exercise was to enhance transparency. Since taxes and levies are subject to change over time, they should not remain embedded in the TER. In the current framework, some components were embedded while others were not, which led to confusion.”

Brokerage limits cut

Brokerage limits have also been revised based on industry feedback:

Cash market brokerage: reduced from 8.59 basis points to 6 bps

Derivatives brokerage: reduced from 3.89 bps to 2 bps

Additionally, extra 5 bps charges on exit-load funds have been removed.

Shorter, clearer, investor-friendly regulations

The new regulations are about 44 per cent shorter, shrinking from 162 pages to 88 pages, with a word count reduced by around 54 per cent, from nearly 67,000 words to about 31,000. “The new mutual fund rules are shorter, clearer, and investor-friendly,” Pandey added.

Lower caps for index funds, ETFs and equity funds

The expense cap for Index Funds and ETFs has been reduced from 1.00 per cent to 0.90 per cent, excluding statutory charges. Equity funds will now have revised TER slabs, with large-AUM funds enjoying lower expense ratios.