Sebi Brokerage Cap Cut: Mutual Funds Seek Compromise
Why in the news
Sebi floated a major overhaul of mutual fund rules, including sharp cuts to brokerage and transaction costs charged beyond the TER. Fund houses want a middle path.
Proposed caps
| Segment | Now | Proposed |
|---|---|---|
| Cash market | 0.12% (12 bps) | 0.02% (2 bps) |
| Derivatives | 0.05% | 0.01% |
Key facts
- Objective: stop heavy trading costs reaching investors and avoid duplicate research costs in brokerage.
- TER: annual fee for running a scheme, a percentage of average AUM.
- Sebi sought turnover and brokerage impact data from AMCs via AMFI.
Concerns of AMCs
- Margins: AMCs may bear research costs; estimated 1-8% hit to core revenue.
- Small AMCs lack research teams and may struggle to buy it.
- Block deals may be lost if brokers favour higher-commission clients.
- Brokers may lose bundled research-plus-execution income.
Other issues
- Easing distributor exam norms for Specialized Investment Funds (SIFs).