Capital markets regulator SEBI is likely to take up a slew of regulations, including tighter disclosure norms for foreign portfolio investors (FPIs) and review of the fees levied by mutual funds on investors in its board meeting scheduled on June 28. The regulator is also expected to discuss norms related to the reduction of the timeline for listing of shares in public issues from existing six days to three days. Last month, SEBI floated a consultation paper proposing tighter disclosure norms for high-risk FPIs aimed at preventing circumvention of Minimum Public Shareholding (MPS) rules and possible misuse of FPI route to acquire or takeover stressed Indian companies at a lower valuation. This came on the back of Adani-Hindenburg row. The US-based short seller in its research report had alleged that some FPIs held a significant stake in the listed companies of the Adani Group – a claim the Group has denied. The paper had proposed that high-risk FPIs, holding more than 50 per cent of their equity Asset Under Management (AUM) in a single corporate group and or having an overall holding in Indian equity markets of over Rs 25,000 crore will be required to comply with new disclosure requirements. On May 18, the markets regulator came out with a paper on the rationalization of the total expense ratio (TER). It proposed that TER charged by mutual funds should be calculated at the level of the AMC (asset management company) and not at the scheme level. Mutual funds are permitted to charge certain operating expenses for managing a mutual fund scheme – such as sales & marketing, advertising expenses, administrative expenses, transaction costs, investment management fees, registrar fees, custodian fees, and audit fees – as a percentage of the fund’s daily net assets. All such costs for running and managing a mutual fund scheme are collectively referred to as TER and are collected from the investors. In the draft paper, SEBI also proposed that TER should be inclusive of securities transaction tax (STT) and goods and services tax (GST) on investment and advisory fees. The paper said that the proposed new methodology of calculation of TER can bring about transparency and reduction in the cost of investment in mutual funds for investors based on economies of scale. SEBI may also look at tightening margin funding norms to reduce funding for speculative trading and protect retail investors. Pricing in trading of unlisted equities is one of the areas of concern for the regulator and it might also come up in the board meeting, according to a person familiar with the matter.
