SEBI issues Circular on Total Expense Ratio for Mutual Funds

Jun 06, 2018 | by Avantis RegTech Legal Research Team

Secretarial Compliance

The Securities and Exchange Board of India (SEBI) had issued Notification No.SEBI/LAD-NRO/GN/2018/14 dated May 30, 2018 amending the SEBI (Mutual Funds) Regulations, 1996. The following changes have been prescribed to protect the interests of investors in securities and to promote the development of, and to regulate the securities market:

(1)                Charging of additional expenses in terms of Regulation 52 (6A) (c) of SEBI (Mutual Funds) Regulations, 1996:

Pursuant to amendment to Regulation 52 (6A) (c) of SEBI (Mutual Funds) Regulations, 1996; the reference of “0.20” in all applicable circulars previously issued shall be substituted by "0.05". This will be applicable with effect from the date of the aforementioned notification on amendment to SEBI (Mutual Funds) Regulations, 1996.

(2)               Total Expense Ratio – Change and Disclosure:

SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/18 dated February 05, 2018 on ‘Total Expense Ratio – Change and Disclosure’, has been modified as under:

i.              Paragraph 1(a) of the aforementioned circular shall read as:

‘AMCs shall prominently disclose on a daily basis, the TER (scheme-wise, date-wise) of all schemes under a separate head – “Total Expense Ratio of Mutual Fund Schemes” on their website and on the website of AMFI in downloadable spreadsheet format as per Annexure A.’

ii.            Paragraph 1(b) of the aforementioned circular shall read as:

‘Any change in the base TER (i.e. TER excluding additional expenses provided in Regulation 52(6A)(b), 52(6A)(c) of SEBI (Mutual Funds) Regulations, 1996 and Goods and Services Tax on investment and advisory fees) in comparison to previous base TER charged to any scheme/plan shall be communicated to investors of the scheme/plan through notice via email or SMS at least three working days prior to effecting such change. (For example, if changed TER is to be effective from January 8, 2018, then notice shall be given latest by January 2, 2018, considering at least three working days prior to effective date). Further, the notice of change in base TER shall be updated in the aforesaid section of website at least three working days prior to effecting such change.

Provided that any decrease in TER in a mutual fund scheme due to various regulatory requirements, would not require issuance of any prior notice to the investors.’

The above paragraph will be applicable with immediate effect.

[Circular SEBI/HO/IMD/DF2/CIR/P/2018/91]



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