By Sampurna Majumder
A number of reforms, such as those pertaining to mutual fund standards and the Issue of Capital and Disclosure Requirements (ICDR) regulations, are scheduled to be discussed by the Board of the Securities and Exchange Board of India (SEBI), which is set to convene on Wednesday.
According to reports, the board will also be looking at a proposal to streamline the disclosures in initial public offerings (IPOs) and a recent recommendation from the high-level committee (HLC) on conflicts of interest, investments and liabilities of its members and senior officials.
The markets regulator released a discussion paper on the review of mutual fund laws in October of this year. Reducing the total expense ratio (TER) of mutual fund costs by 15 basis points (bps) for closed-ended schemes was one of the main ideas. Concerns about the updated TER have been highlighted by the mutual fund sector.
All of the costs borne by investors at any given time are included in TER.Along with the current permitted expenses for broking, exchange, and regulatory fees, the markets regulator had recommended excluding all the statutory levies, such as Securities Transaction Tax(STT), Goods and Services Tax (GST), Commodity Transaction Tax (CTT), and stamp duty, from the expense ratio limits in order to promote transparency.
By ensuring that fund portfolios include market-traded, liquid and transparently valued securities, the action is meant to safeguard retail investors. Risks related to pre-IPO investments included illiquidity, opaque valuations, and possible IPO delays or cancellations.
This change boosts transparency and reduces risks for general investors while cutting off a source of ‘alpha’, which are excess returns for mutual fund managers. The pre-IPO funding shortfall is expected to be addressed by Portfolio Management Services (PMS) and Alternative Investment Funds (AIFS).
In order to make investments more efficient and transparent for investors, SEBI has also approved a thorough revision of the 1996 MF Regulations, which includes updating expense ratios and broking caps.