SEBI Meeting: Mutual Fund Rules, IPO Lock-Ins, Broker Regulations On Agenda

The board of capital market regulator Securities and Exchange Board of India (SEBI) is set to meet on Wednesday to deliberate on and clear a host of key proposals impacting India’s capital markets.

According to sources, the agenda will include a sweeping review of mutual fund regulations, stockbroker norms and the Issue of Capital and Disclosure Requirements (ICDR) framework, with the objective of improving ease of doing business and deepening retail investor participation. The board may also take up proposals to revamp the conflict-of-interest code applicable to SEBI whole-time members and officials.

Mutual fund regulations under review One of the key proposals relates to capping brokerage fees paid by asset management companies (AMCs). In a consultation

paper, SEBI proposed reducing brokerage in the cash segment to 2 basis points from 12 basis points, and in derivatives to 1 basis point from 5 basis points. Institutional brokerages and AMCs have sought relief on these proposals. The board may also revisit plans to lower total expense ratios (TER) by 15 basis points for open-ended schemes and 25 basis points for closed-ended schemes. SEBI has also proposed excluding statutory levies such as STT, GST, CTT and stamp duty from TER limits, and allowing performance-linked expense ratios to enhance transparency.

Stockbroker rules and trading framework
SEBI is also expected to review stockbroker regulations aimed at simplifying compliance, lowering costs and strengthening investor protection. Proposals include formally defining algorithmic trading, clarifying proprietary trading, allowing brokers access to the NDS-OM platform for government securities, and defining an Execution Only Platform for digital platforms offering direct mutual fund plans.

IPO lock-ins and disclosures
The board may consider amendments to address IPO lock-in challenges, including enabling pledged pre-issue shares to be tagged as locked-in through a technology-driven process. SEBI is also likely to discuss replacing the abridged prospectus with a simplified 15–20 page Offer Document Summary for IPOs.

Other key proposals
The meeting agenda may include easing dematerialisation of old physical shares, permitting incentives in public debt issues, raising the High Value Debt Listed Entities threshold from Rs 1,000 crore to Rs 5,000 crore, and expanding the mandate of credit rating agencies to cover instruments regulated by other financial sector regulators under a ring-fenced structure.

The board may also discuss recommendations of a high-level committee on strengthening SEBI’s conflict-of-interest framework, alongside proposals related to alternative investment funds and certification norms.