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Kolkata: Come April 1, and the new rules of Sebi n mutual funds will kick in. SEBI has notified the SEBI (Mutual Funds) Regulations, 2026, making major regulatory changes for the mutual fund industry. In short, the new rules are aimed at reducing the burden of expenses on investors, increasing transparency of costs and establish accountability for asset management companies and also trustees. The changes got the nod of the Sebi board on Dec 17 and the notification has now come for the implementation to take place.
From the point of the view of the investors, the most significant aspect of the new rules is related to the Total Expense Ratio or TER. In future only those expenses which are permitted by the regulator can be charged to investors under TER and these are base expense ratio, permitted brokerage costs, transaction costs related to trade execution, statutory levies, and exit loads. Apart from these no other expenses should be borne by the investor. All other expenses have to be bore by the AMC.
The old regulatory framework for mutual funds has been virtually discarded paving the way for an expanded role for trustees and independent directors who will need to keep a close vigil on the investment management agreement, remuneration paid under the scheme, service contracts entered into with related parties and fees charged to investors. Trustee have to identify deficiencies and inform the AMC in writing and ensure their timely rectification.
Trustees and independent directors have been handed over another important governance-related function. They must ensure that the remuneration structure does not create conflicts of interest with investors. Annual reports have to mandatorily include detailed commentary from the trustees on the scheme's performance, historical data per unit, and clear information related to expenses and valuation. The AMC has to provide scheme-wise digital annual reports to unitholders within a stipulated time window.
The new measures have been drawn up keeping the interest of the investor at the centre of the exercise. By paving the way for limited expenses, enhanced vigil oversight and greater transparency, the regulator has made it clear that there will be no opportunity of fleecing investors in the mutual fund industry. Accountability will be strictly enforced.
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, precious metals, commodity, REITs, InvITs and any form of alternative investment instruments and crypto assets.)
