The regulator SEBI is gearing up for a substantial regulatory review that will cover mutual fund (MF) frameworks and stock broker rules. At the board meeting scheduled for December 17, SEBI will examine proposals to modernise outdated regulations, enhance transparency and streamline compliance.
Key Proposals Under Review
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Unbundling of broking fees: For example, separating the execution fee from research or advisory components in broker charges.
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Revamp of the total expense ratio (TER) in mutual funds: Including excluding statutory levies (e.g., STT, GST, CTT, stamp duty) and brokerage/exchange/regulatory fees from TER limits.
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Updating the 1992 stock-broker regulations: These rules are about 30 years old and include parts that may no longer align with current markets (for instance, algorithmic trading definition is missing).
Aimed at easing compliance burdens, removing redundant norms, and improving the ease of doing business in the capital markets.
Why This Is Significant
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For investors: Greater transparency in what they’re paying (broking fees, fund charges) helps with informed decision-making.
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For mutual funds and brokers: The changes could impact revenue models, especially if fee caps are lowered or cost structures re-defined. For example, the proposed cap reduction may affect profit margins for asset-managers.
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For the broader capital-markets ecosystem: Modernising regulation will help align India’s frameworks with global best practices, particularly in areas like algorithmic trading, risk management and disclosure norms.
SEBI’s upcoming regulatory review signals a pivot toward greater transparency, simpler cost structures and modernised compliance in India’s investment ecosystem. For your role in wealth-management, this means staying alert to changes in fee structures, service models and cost implications and proactively guiding your clients about how these may impact their investments and advisory relationships.
Source: The Economics Times