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Sebi asks mutual fund houses to disclose total expense charge on a daily basis

The markets regulator also asked mutual fund houses to communicate to investors any change in the base Total Expense Ratio of the scheme through email or SMS at least three working days prior to effecting such change.

business Updated: Feb 06, 2018 14:48 IST
Press Trust of India, New Delhi
Sebi,Securities and Exchange Board,Mutual fund houses
The logo of the Securities and Exchange Board of India is pictured on the premises of its headquarters in Mumbai. (Reuters file)

Pushing for uniformity in disclosures, Securities and Exchange Board (Sebi) has asked mutual fund houses to prominently disclose on a daily basis the total expenses charged to customers for all schemes under a separate head on their websites.

The markets regulator also asked them to communicate to investors any change in the base Total Expense Ratio (TER) of the scheme through email or SMS at least three working days prior to effecting such change.

The TER is a percentage of a scheme’s corpus that a mutual fund house charges towards expenses including administrative and management.

The move comes after Sebi observed that there are frequent changes carried out in total expense ratio and such changes are not prominently disclosed to investors.

“AMCs (Asset Management Companies) shall prominently disclose on a daily basis, the TER of all schemes under a separate head -- Total Expense Ratio of Mutual Fund Schemes’ on their website in downloadable spreadsheet format,” Sebi said in a circular.

This move is part of the effort by the Securities and Exchange Board of India (Sebi) to bring uniformity in disclosure of actual TER charged to mutual fund schemes and to enable the investor to take informed decision.

The new directives would be applicable from March 1.

However, any decrease in TER on account of lower applicable limits due to increase in daily net assets of the scheme would not require issuance of any prior notice to the investors. Such drop should however be immediately informed to investors through email or SMS.

Change in the base TER charged to the scheme shall be intimated to the board of directors of AMC along with the rationale recorded in writing.

The changes in TER need to be placed before the Trustees on quarterly basis along with rationale for such changes.

Last week, the regulator had allowed mutual fund houses to charge additional TER of up to 30 basis points from beyond top 30 cities, as against 15 earlier.

First Published: Feb 06, 2018 14:25 IST