SEBI Plans Overhaul of Brokerage, MF Rules in December Board Meeting

The Securities and Exchange Board of India (SEBI) is set to introduce sweeping reforms for brokerages and mutual funds (MFs) in its December board meeting. The changes aim to enhance transparency, protect investors, and streamline operations in India’s booming capital markets.

Key Reforms Expected

1. Brokerage Fee Structure Revamp

• SEBI may cap upfront commissions to prevent mis-selling.
• Stricter disclosure norms for all charges to ensure investor clarity.
• Possible limits on excessive brokerage fees.

2. Mutual Fund Expense Ratio Rationalization

• Tighter regulations on expense ratios to reduce investor costs.
• Lower fees for passive funds (ETFs, index funds) to boost retail participation.
• Clearer disclosures on how expense ratios are calculated.

3. Faster Investor Grievance Redressal

• New mechanisms for quicker complaint resolution against brokers and AMCs.
• Potential arbitration framework for investor-mediator disputes.

4. Easier Digital Onboarding & KYC

• Simplified KYC norms for MF investments.
• Mandatory integration with central KYC repositories.

Why These Changes Matter

India’s mutual fund AUM has crossed ₹50 lakh crore, and demat accounts exceed 14 crore. Yet, issues like hidden charges and mis-selling persist. SEBI’s reforms aim to:
– Increase transparency in fees and commissions.
– Encourage retail investment through lower costs.
– Align India’s markets with global standards.

Industry Reactions

Investor groups welcome the move, but brokerage firms and AMCs may face challenges:
– Distributors could see lower commissions.
– Fund houses may need to adjust profitability expectations.

A brokerage executive noted: “Sudden changes could disrupt business—phased implementation would help.”

What’s Next?

• SEBI’s December meeting will finalize proposals.
• Consultation papers may follow for stakeholder feedback.
• Reforms could roll out in early 2025.

Investors should stay updated as these changes could reshape brokerage and MF interactions.