The Securities and Exchange Board of India (SEBI) on Wednesday approved overhauls of regulations governing stockbrokers and mutual funds, while deferring a decision on the proposed conflict-of-interest framework for the regulator’s board members, citing privacy and operational concerns.
“There are privacy concerns among certain employees about public disclosure of assets and liabilities, including movable and immovable assets. While they are willing to make such disclosures internally to the appropriate authority, there is reluctance around placing this information in the public domain,” SEBI Chairman Tuhin Kanta Pandey said at a press conference after the board meeting.
One of the other issues is around whether spouses using their own resources should face restrictions. Even global regulators such as the US SEC do not impose blanket bans and instead rely on pre-approval and disclosure-based mechanisms, he said. The board, he said, would hold further discussions keeping in view employee concerns, public feedback, media reports and operational modalities.
Pages reduced
The SEBI board approved the replacement of the nearly three-decade-old stockbrokers’ regulations with a new, streamlined framework. The revised rules have been cut to 29 pages from 59 earlier, with a sharper focus on core compliance principles such as protection of client funds and securities, risk management, internal controls and cyber security, while removing repetition and outdated provisions.
The board also cleared a comprehensive rewrite of the mutual fund regulations, reducing their length to 88 pages from 162. A key change is the restructuring of the Total Expense Ratio (TER) framework, under which statutory levies such as securities transaction tax, GST, stamp duty and commodities transaction tax will be excluded from base expense ratio limits and charged separately on actuals. SEBI has also removed the additional 5 basis points expense allowance linked to exit loads.
Brokerage caps
Following industry feedback and opposition, brokerage caps for equity cash market transactions have been fixed at 6 basis points, exclusive of statutory levies, compared with higher effective costs earlier, while brokerage for derivative transactions has been set at 2 bps. Pandey said that these are caps, not floors, and fund houses remain free to charge lower costs in a competitive market.
Further, the regulator will also make IPO disclosures more accessible to retail investors. A concise, standardised abridged prospectus will now be made available at the draft red herring prospectus (DRHP) stage itself, allowing investors to assess key details earlier in the process. SEBI board has also approved system-driven lock-in mechanisms for pledged pre-issue shares to ensure compliance with IPO norms.
On concerns around offer-for-sale (OFS) and anchor allocations, Pandey reiterated that SEBI would continue to follow a disclosure-based regulatory regime. “We do not want to interfere in pricing so long as it is fair and transparent,” he said, adding that guardrails would be examined only if transparency is compromised