By Jayshree P Upadhyay and Hritam Mukherjee
MUMBAI, Dec 17 (Reuters) – India’s markets regulator on Wednesday approved changes to mutual fund fee structures to provide more transparency to investors, but postponed a decision on a new framework aimed at addressing conflicts of interest among its senior officials.
The Securities and Exchange Board of India approved measures to encourage a transparent break-up of costs charged by mutual funds and to mandate disclosure of all the components of such charges.
SEBI, however, revised its earlier proposal to cap the brokerage that mutual funds pay, raising the limit to 6 basis points from 2 bps for equity cash transactions, after industry feedback that a sharp reduction could curb fund managers’ ability to pick stocks.
Fund managers currently pay up to 12 bps as brokerage to buy and sell stocks in their portfolios.
With the new cost structure for mutual funds, the average charges will fall by 10 to 15 bps, according to a SEBI statement.
KEY CHANGES
SEBI has reduced the compliance requirements for small brokers and defined new market practices such as algorithmic and proprietary trading, giving itself more power to regulate them.
The regulator also altered the lock-in requirements for existing shareholders in public issues, excluding large shareholders who have the ability to influence company decisions.
Under the new rules, lock-in requirements for shares before a company goes public will be automatically enforced even if pledges are invoked or released.
This will address delays in the listing process, SEBI said.
“With SEBI approving the revision of lock-in rules for pledged pre-IPO shares, a major operational challenge faced by many companies, especially where shares are pledged to multiple lenders, has now been addressed,” said Makarand Joshi, founder partner of corporate compliance firm MMJC Associates.
It also said issuing companies need to upload a summary of key disclosures as part of public offer papers to help improve investors’ understanding of the process.
SEBI approved steps to increase retail participation in debt issues by allowing issuers to offer additional incentives to women, retail and senior investors, among others.
Credit rating agencies will be allowed to rate unlisted debt securities subject to due risk management measures, SEBI Chairman Tuhin Kanta Pandey said at a press conference after the regulator’s board meeting.
Incentives are first steps and debt market requires a number of steps to bring fixed income market to retail investors, Pandey said.
The regulator is also working to overhaul takeover code regulations, he said.
CONFLICT OF INTEREST FRAMEWORK DEFERRED
SEBI’s board deferred a decision on a panel report submitted last month, which deals with managing conflicts during investigations and drafting market policies.
The regulator said employee concerns and operational modalities require more deliberation.
The panel was formed after SEBI’s then chairperson Madhabi Puri Buch faced conflict of interest allegations from the now-defunct Hindenburg Research, which alleged that she had previously invested in offshore funds linked to the Adani group.
Both Buch and the Adani group had denied the allegations.
(Reporting by Jayshree P Upadhyay in Mumbai and Hritam Mukherjee in Bengaluru; Editing by Sonia Cheema, Tasim Zahid and Shilpi Majumdar)
