Archive · 28 Oct 2025
SEBI Proposes Overhaul of Mutual Fund Regulations
Imagine the rules for investing in mutual funds have gotten really complicated over many years.
SEBI, the company that makes the rules, wants to make them much simpler and easier for everyone to understand.
They are proposing to change how much money fund companies can charge for certain services, especially for buying and selling investments.
SEBI wants to lower these charges, called brokerage fees, to save investors money.
They also want to be clearer about all the costs involved in a mutual fund, so investors know exactly where their money is going.
Some old types of funds might be removed, and many administrative tasks will become digital instead of requiring paper.
SEBI is asking for feedback on these changes before they are finalized.
SEBI proposes a significant overhaul of mutual fund regulations to simplify a nearly three-decade-old framework and improve investor protection.
The regulator plans to lower brokerage fee caps from 12 bps to 2 bps for cash transactions and from 5 bps to 1 bps for derivatives.
Statutory levies like GST and stamp duty will be excluded from the Total Expense Ratio (TER) limit to enhance fee transparency.
SEBI is simplifying compliance by removing hard copy submissions of advertisements and moving towards digital communication with investors.
Redundant fund categories will be deleted, and definitions for terms like TER and independent trustees will be clarified.
- Who
- Securities and Exchange Board of India (SEBI)
- What
- Proposed a comprehensive overhaul of mutual fund regulations to simplify rules, enhance transparency, and reduce investor costs.
- When
- Tuesday, October 28, 2025 (publication of draft paper)
- Where
- India
- Why
- To simplify a complex, decades-old regulatory framework, remove redundant provisions, improve investor protection, and reduce costs for investors by clarifying fee structures and lowering brokerage caps.
SEBI's Proposed Changes
Potential Industry Impact
Expense Ratio and Brokerage Caps
SEBI's Proposed Changes
SEBI proposes removing the additional 5 bps expense on schemes with exit loads and significantly lowering brokerage caps (12 bps to 2 bps for cash, 5 bps to 1 bps for derivatives) to prevent double payment for research and cut investor costs. Base expense ratio slabs for open-ended schemes are marginally revised upward by 5 bps.
Potential Industry Impact
The industry may face reduced income due to lower brokerage caps. While base expense ratios are slightly increased, the overall impact on AMCs' profitability is not detailed but could be significant given the proposed reduction in brokerage fees.
Disclosure and Compliance Simplification
SEBI's Proposed Changes
SEBI aims to improve transparency by keeping statutory levies (GST, stamp duty, STT) outside the TER limit. Compliance is eased by removing hard copy submissions of advertisements, digital investor communication, and merging half-yearly portfolio disclosures with monthly reports.
Potential Industry Impact
While simplified, the industry will need to adapt to new digital communication methods and integrated reporting. The removal of certain scheme categories may also affect existing fund offerings.
- Regulator
- Securities and Exchange Board of India (SEBI)
- Publication Date
- Tuesday, October 28, 2025
- Public Comment Deadline
- November 17
- Proposed Cash Transaction Brokerage Cap
- 2 basis points (from 12 basis points)
- Proposed Derivatives Brokerage Cap
- 1 basis point (from 5 basis points)
- Statutory Levies Inclusion
- To be kept outside Total Expense Ratio (TER) limit
