Securities and Exchange Board of India (SEBI) in its board
meet on 16th August,2012 has got the following regulations to
re-energise Mutual Funds and reforms in the Primary Market.
Mutual Funds
SEBI Board has bought in actions to increase the
penetration of mutual fund products and its distribution networks, improve the
reach of MF products in smaller cities / towns, investor protection,
strengthening regulatory framework and alignment of interest od investors,
distributors and AMC’s.
- Asset Management Companies (AMC’s) will be allowed to charge additional Total Expense Ratio (TER) upto 30 basis points (0.30%) if new inflows from beyond top 15 cities are more than 30% of total inflows.
- Allow investment upto Rs.20,000 by cash for small investors without PAN or Bank accounts.
- Transaction cost of Rs.100 / Rs.150 for existing / new investors shall be on product basis.
- SEBI may provide investments in equity schemes of mutual funds, which have securites, allowed under Rajiv Gandhi Equity Savings as the underlying announced in Budget 2012-13.
- Differential treatment for different classes of investors (new investor, direct investor) under same scheme and charge lower expense ratios for such investors.
- Service Tax on investment management fees should be charged on the scheme.
- The entire exit loads will be credited to the scheme and the AMC’s will be able to charge additional TER upto 20 bps (0.20%).
Primary Market
SEBI Board has developed framework
for enhancing participation of retail investors, facilitating capital raising
from issuers, enhancing market integrity, investors confidence and regulation
of Investment Advisors.
- Increase the nationwide broker network of stock exchanges at more than 1000 locations in addition to the existing channels, for distributing IPO’s in electronic form.
- All ASBA banks are mandated to provide ASBA facility in all branches; to reduce the time taken for issuance to listing of securities.
- The minimum application size of IPO increased to Rs.10,000 – Rs.15,000 from Rs.5,000 – Rs.7,000.
- All individuals, corporate body, partnership firm, Financial Planners providing investment advise to the investors for consideration (i.e. by paying fees) must be registered as Investment Advisors under SEBI (Investment Advisors) Regulations, 2012 (“Investment Advisors Regulations”).
- Insurance advisors, MF advisors (AMFI registered), CA’s, lawyers, stock brokers / sub-brokers are excluded from registering themselves as Investment Advisors.
- Only the act of giving advice to the investors will be regulated under this regulation, while the product regulator will regulate the selling of products.
