The Securities and Exchange Board of India (SEBI) has announced major changes to mutual fund rules to improve transparency and protect investors.
These new regulations will also strengthen governance within mutual fund houses.
The revised rules will come into effect from April 1, 2026.
Here’s a simple and clear explanation of what’s changing and how it may impact investors.
New Mutual Fund Expense Rules Explained
SEBI has made important changes to how mutual fund expenses are calculated and disclosed.
Under the new rules, mutual fund schemes can charge a base expense ratio linked to their performance.
However, schemes that choose this option must strictly follow SEBI’s expense structure and disclosure guidelines.
SEBI has also made it mandatory for fund houses to clearly disclose total expenses in different components, making it easier for investors to understand where their money is going.
Lower Brokerage Limits to Benefit Investors
To reduce trading costs, SEBI has cut brokerage limits.
In the cash market, the maximum brokerage has been reduced to 6 basis points.
In the derivatives segment, the brokerage cap has been lowered from 3.89 basis points to 2 basis points.
This move is expected to reduce costs and improve overall returns for investors.
Clear Separation of Fund Expenses
Earlier, costs like brokerage, securities transaction tax (STT), stamp duty, and exchange fees were included in the Total Expense Ratio (TER).
Under the new rules, these charges will be shown separately.
The revised base expense ratio will only reflect the fees charged by the asset management company for managing the fund.
This change will give investors a clearer picture of actual fund management costs.
Stronger Oversight and Governance
SEBI has expanded the role and responsibility of trustees and key management personnel (KMPs).
This move is aimed at improving oversight, increasing accountability, and ensuring stronger governance within asset management companies.
It is expected to build greater trust in mutual fund operations.
Proposed Changes in Stock Market Rules
Alongside mutual fund reforms, SEBI has also proposed major changes to stock market trading rules.
These proposals aim to simplify regulations, reduce duplication, and lower compliance burdens for market participants.
The changes are part of SEBI’s broader plan to improve ease of doing business in equity as well as commodity futures and options markets.
Overall, these reforms signal SEBI’s continued focus on investor protection, transparency, and efficient market functioning.
