SEBI notifies revamp of mutual fund regulation; to come into effect from April 1

The new regulations replace the earlier regime and significantly expand the responsibilities of trustees and independent directors, who will now be required to exercise closer oversight over investment management agreements, compensation paid by schemes, service contracts with related parties and the overall reasonableness of fees charged to investors. Trustees have also been mandated to identify deficiencies, communicate them to AMCs in writing and monitor their rectification.

• SEBI notifies new mutual fund regulations effective April 1, 2026
• New rules tighten expense controls and expand trustee oversight
• Only specified expenses allowed under TER; extra costs borne by AMCs or trustees

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The Securities and Exchange Board of India (SEBI) has notified the SEBI (Mutual Funds) Regulations, 2026, marking a comprehensive overhaul of the mutual fund regulatory framework with a focus on investor protection, tighter control over expenses, stronger governance and clearer accountability of asset management companies (AMCs) and trustees. These regulations shall come into force with effect from April 1, 2026.

The Securities and Exchange Board of India (SEBI) on December 17, during its board meeting approved a comprehensive overhaul of mutual fund regulations aimed at improving cost transparency and reducing the expense burden on investors.

Also read: Mutual fund expense ratio: What it really pays for and why SEBI’s latest changes matter

The new regulations replace the earlier regime and significantly expand the responsibilities of trustees and independent directors, who will now be required to exercise closer oversight over investment management agreements, compensation paid by schemes, service contracts with related parties and the overall reasonableness of fees charged to investors. Trustees have also been mandated to identify deficiencies, communicate them to AMCs in writing and monitor their rectification.

One of the key highlights is regarding TER. The regulations notes that only specified expenses can be charged to schemes under the Total Expense Ratio (TER) framework. Charges to investors are restricted to the base expense ratio, permitted brokerage costs, transaction costs related to trade execution, statutory levies and exit loads, as may be specified by SEBI. Any expense not expressly allowed under the TER framework will have to be borne by the AMC, trustees or sponsors and cannot be passed on to investors. The rules also clarify that transaction costs incurred for trade execution will not form part of the base expense ratio, reinforcing transparency in how scheme expenses are presented.

The regulation also includes governance-based checks, requiring trustees and independent directors to review compensation arrangements and ensure that remuneration structures do not encourage conflicts of interest or misalignment with investor interests.

The regulations also strengthen disclosure and reporting requirements. Annual reports must include detailed trustee commentary on scheme performance with justification, comprehensive per-unit historical statistics and clear disclosures on expenses and valuation. AMCs are required to provide digital copies of scheme-wise annual reports to unitholders within prescribed timelines.