Rules for investing in mutual funds.
Stock market regulator SEBI has approved major changes in the rules related to mutual funds and stock brokers. The purpose of these reforms is to simplify the rules, reduce the expenses on investors and make the financial system more transparent. It is believed that this is the biggest regulatory change in the last several years, which will have a direct impact on the pockets of common investors.
SEBI has decided to rewrite the rules related to mutual funds. Under this, new 'SEBI (Mutual Fund) Regulations, 2026' will be brought. In the old rules, the things which were scattered in different circulars, will be brought in one place so that it becomes easier for the investors to understand. SEBI says that the basic rules related to investor protection will remain the same, but the language will be simpler and information will be given in a more clear manner.
The most important change for investors is related to the expense ratio of mutual funds. SEBI has now named it 'Base Expense Ratio'. This means that government charges like GST, stamp duty and transaction tax will now be shown separately. This will give investors a clear idea of where their money is being spent.
Apart from this, the base expense ratio limit has been reduced in many types of funds. Management fees in options like closed-ended equity funds, debt funds, index funds and ETFs will be lower than before. Investors will get direct benefit from this because returns can be better in the long run.
SEBI has also reduced the maximum limit of brokerage in cash and derivatives markets. Now brokers will not be able to charge more for buying and selling shares and futures-options trading. This will reduce the trading expenses of small and retail investors and they will be able to participate in the market with more confidence.
There is also good news for those investing in IPO. SEBI is going to bring a short and simple prospectus, through which common investors will be able to quickly understand what the company is about and what are the risks. There will be less need to read long documents. Along with this, SEBI has allowed additional interest or discount to certain investors to promote the corporate bond market. This may also attract retail investors towards investing in bonds.
The post-listing process has also been made easier. Now in many cases there will be no need for confirmation letter and shares can be credited directly to the demat account quickly. The process which earlier took months can now be completed in a few weeks.
