India's markets regulator to ease proposals on mutual fund fee structures - sources

Aditya Birla Sun Life Amc

02/08/2023 06:52

By Jayshree  P Upadhyay
       Aug 2 (Reuters) - India’s markets regulator will put
forth two options to water down its earlier proposal to levy a
standard investor fee on mutual funds, to limit the impact on
the profitability of the 44.3 trillion-rupee  ($537.75 billion)
asset management industry, two sources with direct knowledge of
the matter said.
     The changes, following a push-back from the industry, will
be part of a discussion paper likely to be issued in the coming
weeks, the sources said. A discussion paper is the first step in
crafting regulations. 
    Both sources declined to be identified as they are not
authorised to speak to the media. 
    A spokesperson for the Securities and Exchange Board of
India (SEBI) did not respond to an email sent on Monday.
    The regulator is exploring an option to let mutual funds
charge higher fees with all expenses, including brokerage and
taxes paid by fund houses, the sources said.
    SEBI's original proposal allowed fund houses to charge a
maximum fee of 2.55% of the assets under management (AUM) with
all expenses, including brokerage costs.
    A final decision will be taken after receiving feedback on
the discussion paper, but the industry expects it to be set at a
level which has a "marginal impact" on profitability, said one
of the sources.
    In a presentation to the regulator in June, the industry
argued that the original proposals would squeeze the
profitability of almost all asset management companies (AMCs) by
20-80%, said the second source.
    The other option is to exclude brokerage and taxes but the
investor fees will be lower, the sources said.    
        Arbitrage funds that buy and sell securities frequently
and hence have a higher tax burden, will be allowed to choose
the second option, the sources added. 
        Both options were discussed with an internal committee
finalising rules on July 21, according to the first source. 
    SEBI's discussion paper on mutual fund fees, first released
on May 18, drew the ire of the industry, prompting the regulator
to defer a decision to it June 29 board meeting.
    At a news conference following the board meeting, SEBI's
chairperson, Madhabi Puri Buch, said the regulator would issue a
fresh discussion paper which will make the industry "quite
happy." 
    
($1 = 82.3800 Indian rupees)
    

 (Reporting by Jayshree  P Upadhyay; Editing by Dhanya Ann
Thoppil)
 ((Jayshree.Pyasi@thomsonreuters.com; 9920092491; Reuters
Messaging: Twitter: @jaysh88))