MF Broker Fee Cap: SEBI Plans Talks With AMCs
Why in the news
SEBI intended to meet senior AMC executives on limiting brokerage that mutual funds pay, part of a wider revamp of the Total Expense Ratio (TER).
| Segment | Current | Proposed |
|---|---|---|
| Cash market | 12 bps | 2 bps |
| Derivatives | 5 bps | 1 bps |
Key facts
- Goal: investors should not pay for research twice, via brokerage and via AMC research.
- Sell-side brokers resist and suggest 6-7 bps.
- SEBI plans to unbundle TER, keeping statutory levies such as STT and stamp duty out.
- Equity scheme TER now: 2.25% at ₹500 crore AUM, down to 1.05% at ₹50,000 crore AUM.
About TER
The yearly fee a scheme charges to operate, shown as a percentage of average AUM; higher TER erodes net returns. Components: management fee, administrative costs, marketing and distribution expenses, custodian and registrar fees, legal, audit and compliance costs.
Exam angle
- TER is a percentage of average AUM.
- STT stays outside TER.