SEBI Board meeting outcome: Mutual fund investments to get cheaper, and other highlights

In its last board meeting for the FY-18, capital markets regulator SEBI (Securities and Exchange Board of India) accepted 40 out of 80 recommendations of Kotak Panel pertaining to a host of issues, including ways to strengthen algo trading, amendments to rules on angel funds, rationalization of expense ratio in mutual funds, buybacks, and takeovers. Notably, the regulator has accepted 40 out of 80 Kotak panel recommendations without any modifications, and 15 panel recommendations with some changes.

Elaborating on the various decisions taken by the board, SEBI Chairman Ajay Tyagi pointed out various decisions taken by the regulator including enhanced disclosure norms for related party transactions, rules relating to corporate board meetings, the number of directors, reduction of mutual fund fees and the insolvency and bankruptcy code among others.

Notable among the rules is that SEBI has now reduced the maximum number of Directors on the board to 8 from 10 earlier. The new rule will come into effect from April 1. Further, SEBI has retained the number of board meeting for corporates at 4 meetings annually, and declined to accept the proposal of 5 meetings in the year.

Ajay Tyagi highlighted that in a bid to reduce cost of investing into mutual funds, the additional expense from mutual funds to is reduced to 5 basis points of AUM from 20 basis points earlier. The regulator has revised the expenses charged to mutual fund companies by 15 basis points. In 2012, Sebi had allowed mutual funds to charge 20 basis points of assets under management of the scheme in lieu of exit loads, or the sum collected from investors when they sell holdings.

Clarifying rules regarding the insolvency and bankruptcy code, Ajaj Tyagi said that SEBI understands the urgency regarding the trading ban, “We will decide on trading in IBC cos very quickly,” he told in the same press meeting. He also highlighted that as bankruptcy law is evolving, lot of cases are going to NCLT. The SEBI has also taken various steps to rationalise costs and make algorithmic trading more equitable. Notably, SEBI has asked for sharing of co-location services in order to reduce costs.

Securities and Exchange Board of India ( SEBI )