Sebi in October already released a consultation paper suggesting lowering of mutual fund expense ratio to make them simpler and more transparent.
Under the new rules, Sebi has lowered BER of index funds and ETFs from 1% from 0.9% earlier.
Further, the regulator’s board has also approved a proposal for simplified IPO documents so that retail investors are better informed about important information of the public offer. Sebi chief Tuhin Kanta Pandey said companies will now need to include abridged prospectus, that has relevant information, when filing the draft offer document.
The reset of costs under the new expense ratio framework are aimed at easing compliance burden for fund houses and making investments cheaper for investors.
Under the new framework, the regulator has cut the base expense ratio for close-ended equity schemes to 1% from 1.25%, and for close-ended non-equity schemes to 0.8% from 1% earlier. Index funds and exchange-traded funds will see their BER reduced to 0.90% from 1.00%, while funds of funds investing in liquid index ETFs will also have a 0.90% cap.
For equity-oriented funds of funds, the ceiling has been lowered to 2.1% from 2.25%. In addition, Sebi has reduced the BER for other funds of funds to 1.85% from 2%.Expense ratio is been defined by Sebi to cover all scheme expenses charged to investors. It is the fee deducted from assets under management to cover management and operating expenses. The expense ratio charged in slabs based on the size of the asset under management.
Among other key proposals, the board cleared a recommendation regarding a framework to reduce the compliance burden of companies with large debts by raising the threshold for identifying high-value debt listed entities (HVDLEs) to Rs 5,000 crore from the current Rs 1,000 crore.
Sebi has also moved to lower trading costs in the secondary market. The board approved a reduction in the cap on cash market brokerage to 6 basis points, excluding statutory levies.
In the derivatives segment, the brokerage cap has been cut further to 2 basis points, again excluding levies. The regulator has long argued that falling transaction costs are necessary as volumes rise and technology improves, particularly in derivatives where retail participation has surged in recent years.
The regulator also cleared a sweeping overhaul of the stockbroker regulatory framework, replacing the three-decade-old Sebi (Stock Brokers) Regulations, 1992 with a new set of rules to be notified as the Sebi (Stock Brokers) Regulations, 2025.
The revamp is aimed at updating market regulations to reflect current trading practices, easing compliance and providing greater clarity as business models evolve.
The revised framework formally defines algorithmic trading, lays down clearer norms for proprietary trading, and introduces a regulatory structure for execution-only platforms that enable direct mutual fund transactions.
Sebi has also updated key definitions such as clearing member, professional clearing member, proprietary trading member, proprietary trading and designated director to better align with today’s market architecture and reduce interpretational gaps.