SEBI Board Decisions: Mutual Funds To Get Cheaper, Commodity Derivatives Markets Liberalised

The board has approved amendments to SEBI’s prohibition of fraudulent and unfair trade practices regulation.

These include:

• Expanding the scope of regulations to include employees and intermediary agents
• Fraud now includes activities like misleading information on digital media, front running by intermediaries, misselling of securities or related services, mis-utilisation of client account, diversion of client funds and manipulating benchmark price of securities.
• Bringing further clarity on sharing of unpublished price sensitive information for due diligence or legitimate purposes.

“On the recommendation that SEBI may seek direct power to intercept calls and electronic communication under the Telegraph Act, it was decided that the matter may be referred to the Government to take an appropriate view,” SEBI said in a press release.

SEBI has also approved amendments to its equity delisting regulations.

• In case of voluntary delisting, if the price discovered through the reverse book building process is not accepted by promoters then they will be allowed to give a counter offer. But that counter offer shouldn't be less than the book value and should also be accepted by “such number public shareholders that the post offer promoter shareholding reaches at least 90 percent”.
• The board also approved certain recommendations regarding a review to be carried out by an external expert.
• Promoters of compulsorily delisted companies will have to provide an exit to public shareholders within 3 months from delisting. Currently there is no timeline in place for this.

Tyagi said that mutual fund expenses to be brought down considering economies of scale.

SEBI undertook an internal study to review the Total Expense Ratio of mutual fund schemes. The working group constituted by the Mutual Fund Advisory Committee then submitted a report.

Based on the findings of the report, SEBI’s board took the following decisions:

• TER for closed-ended equity oriented schemes shall be a maximum of 1.25 percent, and for other closed-ended schemes will be a maximum 1 percent.
• TER for index funds and exchange traded funds will be up to 1 percent.
• In Fund of Funds, the TER will be a maximum of twice of the TER of underlying funds.
• For FoFs investing in liquid, index and ETF schemes, the maximum total TER will be 1 percent.
• For FoFs investing in active underlying schemes, the maximum total TER will be 2.25 percent for equity oriented schemes and 2 percent for other schemes.

TER For Open-Ended Schemes

Tyagi said that the details of extended market timings are yet to come from exchanges, hence a decision has not been taken yet.

This is a concept under discussion for some time, Tyagi said adding that the board has approved the proposal. The move provides for linking of multiple clearing corporations. It allows participants to consolidate their clearing and settlement functions, irrespective of the stock exchange on which the trade is executed.