Recently, the Securities and Exchange Board of India (SEBI) has announced that it will incorporate all expenses and taxes within the total expense ratio or TER charged by mutual fund companies. The move is aimed to bring more transparency to the mutual fund industry, and ensure that investors are out of any additional fees on top of the TER.
Currently, mutual fund companies charge a total expense ratio that includes the management fee, administrative expenses, and other costs related with managing the fund. However, expenses such as transaction costs, brokerage fees, and other charges incurred by the fund are charged separately from investors.
The decision by SEBI to incorporate all expenses and taxes within the TER is a significant step towards ensuring welfare of the charging system from the investors. It is also expected that it would reduce the overall cost of investing in mutual funds increasing the overall transparency in the mutual fund industry.
SEBI’s new regulations will come into effect from this month itself. After that, fund houses shall be liable to incorporate GST levied on their fund management within the maximum allowed expense ratio.
According to the authority, the brokerage paid by fund houses to the security companies on mutual funds is above TER. They put down the fact that asset management fees while you’re paying a broker to research for you is baseless. They also claimed the fees are not also claimed professionally.
In conclusion, SEBI’s decision is a significant step towards increasing transparency in the mutual fund industry. The move is expected to benefit investors by reducing the overall cost of investing in mutual funds and improving investor gravity in the market.