The Securities and Exchange Board of India (SEBI) on Wednesday (December 17, 2025) revised the total expense ratio charged by mutual funds, reviewed two-decade-old brokerage rules, and proposed to discuss public comments on the High Level Committee (HLC) regarding its report on conflict of interest.
The market regulator in its board meeting also announced measures to simplify IPO documents for the benefit of investors and allow credit rating agencies (CRAs) to do ratings for unlisted debt instruments.
SEBI decided to cut the maximum expense ratio imposed on investors by up to 15 basis points as part of a comprehensive review of mutual fund regulation at its third quarter board meeting held in Mumbai.
The changes have been implemented across slabs determined by the assets under management of mutual funds.
According to the new rules, the expense ratio will now be called ‘Base Expense Ratio’ (BER), which will exclude other charges including stamp duty, GST and STT. The total exchange ratio will be the sum of BER, brokerage, regulatory fees and statutory fees. The brokerage segment limit has now been reduced to 6 bps for cash market and 2 bps on derivative transactions.
In the consultation paper on MF rules, the regulator proposed that cash market brokerage could be capped at 2 bps and derivatives at 1 bps. One bps is one hundredth of one percent.
In line with the proposals, the additional exit load of 5 bps, which was usually charged in case of premature redemption, has been completely abolished.
Addressing a press conference, SEBI Chairperson Tuhin Kanta Pandey said, “It was very clearly brought to our attention that sell-side research is a bundled cost. We were trying to propose that they can unbundle it and pay brokerage at the lower level and pay for research separately, but that business model is not available today.”
He said efforts to reduce sell-side research costs and brokerage fees were not successful in Europe and the UK
Sell-side research is a brokerage report that is offered by securities brokerage companies. Brokerage includes the cost of research and brokerage commission.
The mutual fund regulation reviews also include simplification of legacy rules, restructuring of roles and responsibilities of AMCs and restructuring of provisions related to prudential investment limits and valuation of securities.
SEBI also revamped the stock brokers rules to simplify the language while updating the contemporary changes along with other changes. Both the mutual fund and brokerage rules were more than two decades old.
The regulator has also simplified the norms for public issues by eliminating the requirement of offer document summary and replacing it with abridged prospectus. The document will be made available to the investor in the form of a QR code.
While IPO disclosures have been simplified, criticisms continue over the quality of companies coming to market, the price of shares and the increasing offer for sale component as a share of the total IPO.
Responding to the criticism, Mr Pandey said there was nothing extraordinary in it and it was not “in line with the facts” and reflected the maturity of Indian investors.
“Indian [investors] Very mature. They may have different types of investors; You have different types of people, and they take chances. Our case as a regulator is to enable different types of risk capital to come into different risk areas and provide investor protection in the context of very good disclosures,” Mr Pandey said.
Certainly, the share of OFS in the average IPO, which is around ₹1,680 crore, was 63% in 2025 and has been rising over the last three years.
The comment assumes significance after Chief Economic Advisor V. Ananth Nageswaran termed IPOs as ‘exit vehicles’ for private equity funds at a recent event.
SEBI also said it had reviewed the report of the high-level committee on conflict of interest, and “certain concerns” had been expressed by staff.
The board also decided on other rules, such as easing lock-in rules in IPOs, allowing debt issuers to offer incentives publicly, and allowing credit rating agencies to rate unlisted debt instruments.
published – December 17, 2025 09:37 PM IST