Investments in mutual funds will get simpler and safer-- but a bit costlier in some cases-- starting tomorrow as the industry is set to implement some wide-ranging reforms by market regulator Sebi.
Among various reform measures taken by Sebi (Securities and Exchange Board of India), the fund houses will have to make more disclosures in the interest of investors. They also have to shift to the one plan per scheme model, moving away from the present practice of cluttering one scheme with numerous plans.
At the same time, fund houses will be able to charge their investors a little bit more as incentive for expanding to small cities, but would also have to set aside a small portion of their assets for investor education and awareness.
The changes in mutual fund regulations were approved by Sebi's board in its last meeting on August 16 and have been notified over the past few days. Now, these would come into effect from tomorrow, October 1.
As per the notifications, the fund houses might charge investment and advisory fee on their schemes, which would have to be fully disclosed in the offer document. In case of a fund of funds scheme, the total expenses of levied on the scheme would be capped at 2.50 per cent of the daily net assets of the scheme.
In addition to the total expenses already levied on schemes, Sebi would allow the fund houses to levy brokerage and transaction costs, which is incurred for the purpose of execution of trade and is included