Mumbai: Mutual Fund investors are all set to enjoy lower brokerage rates if the Exchange Board of India (SEBI) has its way. The stock market regulator is proposing a 15bps reduction in the total expense ratio (TER) for open-ended schemes, with the intention of boosting investments in Mutual Funds.
According to a consulting paper released by SEBI in October, there is a proposal to review the definition of the TER, and revise limits for brokerage charges. The regulator is also planning to do away with the additional 5 basis points (bps) charge that Asset Management Companies (AMCs) were allowed to levy across mutual fund schemes.
The Association of Mutual Funds of India (AMFI), representing the AMCs on the country, are not happy with the proposed regulations. A senior fund manager, on the condition of anonymity, said that a 15bps cut on large schemes could impact the margins of both distributors and AMCs. “The industry is already operating on wafer-thin margins. AMCs will find it challenging if markets turn and correct,” he said.
“The regulator should not reduce TER uniformly across funds. A 15 bps cut for smaller funds may be fine but applying the same reduction to large schemes that already charge around 1.05% does not make business sense,” another manager added.
SEBI will take up the proposal during its December 17 board meeting. Besides this, the board is also considering reviewing various stockbroker regulations that are outdated and aims to ease rules according to current market conditions.
