Sebi exploring options to let mutual funds charge higher fees with all expenses: Report

The changes will be part of a discussion paper likely to be issued in the coming weeks, the sources said.

A spokesperson for the Securities and Exchange Board of India (SEBI) did not respond to an email sent by Reuters on Monday.

The regulator is exploring an option to let mutual funds charge higher fees with all expenses, including brokerage and taxes paid by fund houses, the sources told Reuters.

In its original proposal, SEBI allowed fund houses to charge a maximum fee of 2.55% of the assets under management (AUM) with all expenses, including brokerage costs.

A final decision will be taken after receiving feedback on the discussion paper. However, the mutual fund industry expects it to be set at a level which has a “marginal impact” on profitability, said one of the sources told Reuters.

The industry had made a presentation to the regulator in June, wherein it argued that the original proposals would squeeze the profitability of almost all asset management companies (AMCs) by 20-80%, said the second source.

The other option is to exclude brokerage and taxes but the investor fees will be lower, the sources said.

Arbitrage funds that buy and sell securities frequently and hence have a higher tax burden, will be allowed to choose the second option, the sources added.

Both options were discussed with an internal committee finalising rules on July 21, according to the first source.

SEBI’s discussion paper on mutual fund fees, first released on May 18, drew the ire of the industry, prompting the regulator to defer a decision to it June 29 .

At a news conference following the board meeting, SEBI’s chairperson, Madhabi Puri Buch, said the regulator would issue a fresh discussion paper which will make the industry “quite happy.”

Updated: 02 Aug 2023, 12:11 PM IST