Markets regulator SEBI has approved reforms to make mutual fund fee structures more transparent, mandating detailed disclosure of all cost components. It also revised the proposed brokerage cap to 6 basis points from 2 bps after industry feedback, while deferring a decision on asset disclosures by senior officials.

SEBI approves mutual fund fee transparency norms, revises pre-IPO lock-in rules

The market regulator, SEBI, has approved wide-ranging reforms, including a proposal to simplify the offer document for companies seeking to raise funds.

It also cleared a proposal to enhance mutual fund transparency by breaking down the Total Expense Ratio (TER). The proposal to simplify the offer document summary will enable investors to make informed decisions, it added. It also allowed debt issuers to offer incentives in public issues to certain categories of investors.

The Securities and Exchange Board of India (SEBI) has approved measures to encourage a transparent breakdown of costs charged by mutual funds and also mandated the disclosure of all components of such charges.

Pre-IPO lock-in rule changes

SEBI chief Tuhin Kanta Pandey stated that the regulator has revised the pre-IPO lock-in rules, allowing for the automatic lock-in of pledged shares. Currently, promoters’ shares are locked in for six months, and there is also a requirement for non-promoter shares to be locked in for the same period.

To address this, provisions in the ICDR have been amended to allow depositories to handle pledges directly. This will enable automatic lock-in of shares even when they are pledged, simplifying compliance for companies.

Other key changes

Among other key proposals, the board cleared a recommendation regarding a framework to reduce the compliance burden of companies with large debts by raising the threshold for identifying High Value Debt Listed Entities (HVDLEs) to Rs 5,000 crore from the current Rs 1,000 crore.

This is the fourth board meeting chaired by Sebi chief Tuhin Kanta Pandey, who assumed office on March 1. In its board meeting, the regulator approved a proposal to separate statutory charges like Securities Transaction Tax (STT), stamp duty, and GST from the Total Expense Ratio (TER) to enhance transparency for investors by providing a clearer understanding of all costs involved.

The Sebi board also reviewed recommendations of the high-level panel on conflict of interest, disclosures of assets by its senior officials.