Sebi Board to Review MF Fee Structure and Stock Broker Rules

Source: BS

Context:

The Securities and Exchange Board of India (Sebi) is set to consider a wide-ranging set of regulatory reforms at its upcoming board meeting, aimed at reducing investor costs, modernising market regulations, improving disclosures, and streamlining capital market processes.

Key Regulatory Proposals Under Review

Overhaul of Stock Broker Regulations

• Review of three-decade-old Stock Brokers Regulations
• Objective:
  • Ease compliance burden
  • Align regulations with the Companies Act, 2013
• Key proposed changes:
  • Formal definitions for:
    • Algorithmic trading
    • Proprietary trading
    • Execution-only platforms
• Significance:
  • Provides regulatory clarity amid growing use of automation and advanced trading strategies

Revamp of Mutual Fund Fee Structure (TER)

• Sebi to revisit Total Expense Ratio (TER) norms
• Background:
  • Earlier proposal (2023) faced strong industry resistance
  • Revised proposal floated in October 2025
• Key proposals:
  • Reduction in brokerage and transaction costs:
    • Cash market: 12 bps → 2 bps
    • Derivatives: 5 bps → 1 bp
  • Reduction in overall TER caps by 15–20 bps
• Policy intent:
  • Lower investor costs
  • Enhance long-term returns and transparency

IPO Process and Pledged Shares

• Amendments to ICDR Regulations proposed
• Focus area:
  • Treatment of pledged shares held by non-promoters in IPO-bound companies
• Likely measures:
  • Such pledged shares to be treated as locked-in
  • Depositories to revise frameworks accordingly
• Objective:
  • Prevent misuse and improve disclosure integrity in IPOs

Simplification of Offer Documents

• Sebi may:
  • Rationalise offer document summaries
  • Remove mandatory requirement for an abridged prospectus
• Aim:
  • Improve investor comprehension
  • Reduce complexity and repetition in IPO disclosures

Conflict of Interest Disclosure Norms

• Review of recommendations by a high-level committee constituted in March
• Key recommendations:
  • Expanded disclosures of:
    • Assets and liabilities
    • Trading activities
    • Relevant relationships
  • Disclosure timelines:
    • At appointment
    • During annual reviews
• Objective:
  • Strengthen governance and credibility of market institutions

Debt Market and Dematerialisation Measures

• Sebi may explore:
  • Incentives for debt issuances
  • Easing dematerialisation of physical shares
• Proposed change:
  • Allow higher coupon rates or discounts for select investors in debt issues
• Rationale:
  • Boost depth and participation in corporate bond markets