The Securities and Exchange Board of India (Sebi) on Wednesday notified some of the guidelines mentioned in the circular brought out by it earlier this month, specifically focusing on the charges that a fund house can levy on customers.
The notification states that the exit load charged, if any, should be credited back to the scheme. The mutual fund houses can charge an additional 30 basis points of total expense ratio (TER) for going beyond the top 15 cities if the new inflows from the cities specified are at least 30% of gross new inflows in the scheme or 15% of the average assets under management (year to date) of the scheme, whichever is higher.
However, the expense on account of inflows from such cities shall be credited back to the scheme in case the said inflows are redeemed within a period of one year from the date of investment. The notification also allows fund houses to charge additional expenses of 20 bps as a percentage of the daily net assets of the scheme. A higher expense ratio will give the fund house more leeway to spend money on distribution, marketing and sales expenses and help it expand beyond the top 15 cities, say market observers.
The notification states that the brokerage and transaction costs incurred for the purpose of execution of trade and is included in the cost of investment should not exceed 0.12% in case of cash market transactions and 0.05% in case of derivatives transactions.
