Booster shot: How will Sebi's norms change MF industry

Mutual fund space has got a fungibility with regards to expense ratio. Now the AMC can pretty much decide under what head it wants to spend, how much. The exit load will now be credited back to this scheme and this is really to curtail the high churning that goes on in each of these schemes.

Another important change is 30% of the incremental sales come from beyond the top 15 cities, the expense ratio can be increased by 30 basis points and this will be proportionate to the incremental sale. The service tax will now be charged ultimately to the investor which is at the rate of 12.5% which is currently borne by the AMCs.

Sebi will also set up a self regulatory organisation to regulate selling of mutual funds. It has also asked mutual fund advisory committee to come out with a national mutual fund policy that will deliberate on the tax issues and the disclosures obligations which it has placed on the asset management companies.

It has also recommended to the government tax benefits to equity MF investors under the proposed Rajiv Gandhi EquitySavings Scheme (RGESS).