Sebi has told the mutual fund (MF) industry that the investment and advisory fees will have to be less than 0.75% (75 basis points) of the weekly average net assets in case of an index fund scheme. The total expenses of the scheme, including the investment and advisory fees, cannot exceed 1.5% (150 basis points) of the weekly average net assets.
In a circular issued on Friday, Sebi said the reduced expenses and investment and advisory fees will apply to exchange traded index funds (ETF) also. The regulator has defined index funds as MF schemes which invest in securities in the same proportion as an index of securities. The Assets Under Management (AUM) of the index funds offered by diferent MFs will not be more than Rs 400 crore and for ETFs, the AUM will not be more than Rs 75 crore. The AUM of index funds is not even 1% of the total equity AUM of the MF industry. The changes notified by the Sebi will now be applicable to these index funds and ETFs also. Sebi also amended its MF regulations to incorporate some of the decisions that were taken earlier.
Sebi said, ?Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relevant securities and in all cases of sale, deliver the securities.?
However, the regulator has introduced two new clauses in this regard. It says, a mutual fund may engage in short-selling of securities in accordance with the framework relating to short-selling and securities lending and borrowing specified by the board. And, secondly, a mutual fund may enter into derivatives transactions in stock exchanges in accordance with the framework specified by the regulator.
Further, with regard to carry forward, derivatives and short selling transactions, Sebi said that the fund of a scheme shall not be used in carry-forward transactions provided a mutual fund enters into derivatives transactions on a stock exchange as per the framwork specified by the board. It said that mutual funds may enter into short selling transactions on a stock exchange in accordance with the framework relating to short selling and securities lending and borrowing specified by the board.
Sebi said that a mutual fund may lend and borrow securities in accordance with the framework relating to short-selling and securities lending and borrowing specified by the board.
